MONMOUTHSHIRE COUNTY COUNCIL
ANNUAL ACCOUNTS
2009/10 Monmouthshire County Council Annual Accounts 2009-10
CONTENTS PAGE
Page
1. Explanatory Foreword 2
2. Statement of Responsibilities 7
3. Statement of Internal Control 8
4. Auditor's Report 12
5. Statement of Accounting Policies 14
Core Financial Statements:
6. Income and Expenditure Account 24
7. Statement of Movement on the Council Fund Balance 26
8. Statement of Total Recognised Gains and Losses 28
9. Balance Sheet 30
10. Cash Flow Statement 32
11. Notes to the Accounts 34
Supplementary Financial Statements:
12. Housing Revenue Account (HRA) Income and Expenditure Account 90
13. Statement of Movement on the HRA Balance 92
14. Notes to the Housing Revenue Account 94 Monmouthshire County Council Annual Accounts 2009-10
1 EXPLANATORY FOREWORD
1.1 Introduction 1.1.1 Monmouthshire County Council is a Welsh Unitary Authority and was created on 1st April 1996 by virtue of the Local Government (Wales) Act 1994. 1.1.2 Monmouthshire County Council was formed from a transfer of the services, assets and liabilities of the functions of the former Monmouth Borough Council and parts of the former Blaenau Gwent Borough and Gwent County Councils. 1.1.3 The purpose of this explanatory foreword is to offer a guide to the most significant matters appearing in the accounts and to explain the Authority’s overall financial position. I hope it assists the reader in understanding the financial statements that follow.
1.2 The Accounting Statements 1.2.1 The Authority’s accounts for the year 2009/2010 are set out on pages 24 to 94. They consist of:- • Income and Expenditure Account This statement is fundamental to the understanding of a local authority's activities, in that it reports the net cost for the year of all the functions for which the Authority is responsible, and demonstrates how that cost has been financed from general government grants and income from local taxpayers. The Income and Expenditure Account discloses the income receivable and expenditure incurred in operating the Authority for the year. The surplus or deficit achieved on the Income and Expenditure Account represents the amount by which income is greater than or less than expenditure. Both income and expenditure are measured using essentially the same accounting conventions (UK GAAP) that a large unlisted company would use in preparing its annual financial statements. • Statement of Movement on the Council Fund Balance The items of 'income' and 'expenditure' that are required to be credited or charged to the Council Fund and which therefore must be taken into account in determining the Authority's budget requirement and in turn its Council Tax demand is determined by statute and non-statutory proper practices rather being in accordance with UK GAAP. While the amounts that the Code of Practice on Local Authority Accounting in the United Kingdom - A Statement of Recommended Practice 2009 (the SORP) requires to be included in the Income and Expenditure Account and statute and non-statutory proper practices requires to be included in the Council Fund are largely the same, there are a number of differences. • Statement of Total Recognised Gains and Losses The authority will be recognising other gains and losses in its Balance Sheet that are not debited or credited to the Income and Expenditure Account. The Statement of Total Recognised Gains and Losses (STRGL) is the statement that brings these other gains and losses together with the outturn on the Income and Expenditure Account to show the total movement in an authority's net worth for the year. • Balance Sheet The balance sheet is fundamental to the understanding of an authority's financial position at the 31st March 2010. It shows its balances and reserves and its long-term indebtedness, and the fixed and net current assets employed in its operations. • Cash Flow Statement This consolidated statement summarises the inflows and outflows of cash arising from transactions with third parties for revenue and capital purposes. • Notes The "core" financial statements outlined above are supported by notes to further assist the reader in interpreting the Authority's financial position for the year ended 31st March 2010.
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1.2 The Accounting Statements (continued) • HRA Income and Expenditure Account The Housing Revenue Account (HRA) reflects a statutory obligation to maintain a revenue account for local authority housing provision. This statement shows the income and expenditure on HRA services included in the whole authority Income and Expenditure Account. • Statement of Movement on the HRA Balance This statement shows how the HRA Income and Expenditure Account surplus or deficit for the year reconciles to the movement on Housing Revenue Account Balance for the year. • Notes to the Housing Revenue Account The HRA statements outlined above are supported by notes to further assist the reader in interpreting the Authority's financial position for the year ended 31st March 2010. 1.2.2 The Statement of Accounts is supported by further information contained in the Statement of Accounting Policies which is presented in Section 5 of this document.
1.3 Code of Practice on Local Authority Accounting 1.3.1 The accounts have been prepared in accordance with the latest code of practice applying to local authorities in England and Wales.
1.4 2009/2010 Revenue Expenditure 1.4.1 The details of the Authority’s revenue expenditure for the year are set out in the Income and Expenditure Account and Statement of Movement on the Council Fund Balance which appear on pages 24 and 26. 1.4.2 The Authority manages against its budget requirement for the year based on its internal management and directorate structure. Schools are reported separately during the financial year and are consolidated as part of the production of the year end accounts. 1.4.3 Whilst, the Authority is reporting a £15,671,000 deficit for the year, the principal amounts relating to the provision made for potential equal pay claims and costs arising from the implementation of single status of £5,542,000 and to fixed asset impairments of £12,797,000 where: • £10,342,000 of capital expenditure incurred by the Authority has not resulted in an equivalent increase in the value of the fixed assets; and • £2,455,000 of impairments arising from revaluations undertaken as part of the Authority's rolling revaluation programme the Authority has incurred a deficit on its Council Fund Balance of £304,000. This comprises a £287,000 deficit relating to school budgets, offset by a £17,000 deficit relating to non-school budgets. 1.4.4 When compared against the revised budgets set by the Authority and schools repectively, this illustrates how the Authority has performed against budget for the year of account. 1.4.5 The analysis on page 4 of outturn against revised budget is based on the internal management structure of the Authority and not on the classification prescribed by the Code of Practice. Readers will be able to reconcile the Council Fund surplus to that reported in the Statement of Movement on the Council Fund balance on page 26 of the Accounts. 1.4.6 The Council fund balance, excluding school balances, has decreased from £5,066,000 to £5,050,000 as a result of the deficit for the year. Earmarked revenue reserves have decreased from £15,196,000 to £12,553,000 during the financial year. In total, available revenue reserves to the Authority have decreased by £2,659,000 from £20,262,000 to £17,603,000.
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1.4 2009/2010 Revenue Expenditure (continued) Revised Actual Difference Budget £000 £000 £000 Net Expenditure: Net cost of services (internal management structure) 137,219 136,023 (1,196) Exceptional item - equal pay and single status provision 0 5,542 5,542 Attributable costs of fixed asset disposal 112 99 (13) Interest and investment income (642) (719) (77) Investment losses 0 (75) (75) Interest payable and similar charges 5,340 4,258 (1,082) Transfer to/(from) capital reserves 3,941 3,768 (173) Transfer to/(from) revenue reserves 1,002 (1,594) (2,596)
Financed by: General government grants (74,496) (74,497) (1) Non-domestic rates (23,744) (23,744) 0 Council tax (47,650) (49,044) (1,394)
Council Fund (surplus)/deficit - Non-Schools 1,082 17 (1,065)
Council Fund (surplus)/deficit - Schools 1,053 287 (766)
Council Fund (surplus)/deficit - Total 2,135 304 (1,831)
1.5 Housing Revenue Account 1.5.1 The Authority transferred its council housing stock in January 2008 to Monmouthshire Housing Association. The Housing Revenue Account has remained open as a statutory account during 2008/09 and 2009/10, and has captured residual costs relating to HRA activity following the stock transfer. 1.5.2 The Authority recently received formal consent from the Welsh Assembly Government to close the account on 1st April 2010, at which time the resultant balance on the account will transfer to the Authority's Council Fund balance. 1.5.3 Details of the Authority’s revenue expenditure on council housing services are set out in the Housing Revenue Account and Statement of Movement on the HRA Balance which appear on pages 90 and 92 respectively. Actual outturn was as follows: 2008-09 £000 £000 HRA (surplus)/deficit for the year (1) 147
1.5.4 The Housing Revenue Account balance has increased from £3,353,000 to £3,354,000 as a result of the surplus for the year.
1.6 Reserves 1.6.1 Movements in the Authority’s revenue and capital reserves for the year are detailed in the Statement of Total Recognised Gains and Losses and is supported by notes to the Accounts which appear on pages 61 to 68.
1.7 Loan Debt 1.7.1 The loan debt at 31st March 2010 was £79,320,000 compared to an opening position for the year of £73,362,000. The total net cost of servicing debt in the year was £7,372,000 (£7,609,000 in 2008/2009) made up of £3,207,000 (£3,017,000 in 2008/2009) provisioned for the repayment of principal and £4,165,000 (£4,592,000 in 2008/2009) provisioned for the repayment of interest.
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1.8 2009/2010 Capital Expenditure 1.8.1 Detailed information on capital expenditure incurred in the year appears on pages 47 to 48 to the Accounts. Total capital expenditure in 2009/2010 was £28,637,000 (£20,472,000 in 2008/09). The main items within this figure are shown below along with an analysis of the capital financing arrangements:- Financing £000 Capital receipts (6,587) Loans (9,447) Grants and Contributions (10,975) Revenue and Reserve Contributions (1,628) (28,637)
Expenditure £000 Development of council property 9,149 Maintenance of council property and infrastructure 7,486 Schools modernisation programme 7,517 Other scheme types 4,485 28,637
1.8.2 In terms of capital expenditure incurred on the construction and development of council property, significant expenditure was incurred on delivering capital works at Llanfoist transfer station (£2,281,000), Brewery Yard development (£2,405,000) and Shire Hall restoration (£2,774,000). The most significant scheme delivered as part of the Authority's schools modernisation programme was Rogiet Primary School (£3,266,000). 1.8.3 Other than specific funding support being received from external funding bodies, the Authority is reliant on useable capital receipts and revenue support. The useable capital receipts balance as at 31st March 2010 amounted to £8,174,000 (£12,371,000 as at 31st March 2009). In terms of revenue support, reference is made to available balances in paragraph 1.4.6 of this foreword. 1.8.4 As a result of the withdrawal of the developer on the Abergavenny Regeneration scheme during the financial year, abortive capital costs of £902,000 have been charged against the Authority's revenue account.
1.9 Pension Liabilities 1.9.1 In the past, Local Authorities were not required to follow UK Generally Accepted Accounting Practice (UK GAAP) in accounting for pension costs. However the requirements of Financial Reporting Standard 17 (FRS17) "Retirement Benefits" have been incorporated into the Code of Practice since 2003/04. Full adoption of FRS 17 includes recognition of a net pension liability and a pensions reserve in the balance sheet together with entries in the Income and Expenditure Accounts for movements in the asset/liability relating to defined benefit schemes (with reconciling entries back to contributions payable for council tax purposes via the Statement of Movement on the Council Fund Balance). 1.9.2 The pension liability at the end of the year amounted to £138,419,000 (£103,791,000 in 2008/2009). The Authority is being charged staircased employer contributions in order to redress the balance of the pension fund. Further details are given in note 11.31 to the Financial Statements.
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Monmouthshire County Council Annual Accounts 2009-10
3 STATEMENT ON INTERNAL CONTROL
3.1 Scope of Responsibility 3.1.1 Monmouthshire County Council is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively. The Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness. 3.1.2 In discharging this overall responsibility, the Council is also responsible for ensuring that there is a sound system of internal control which facilitates the effective exercise for the Council’s functions and which includes arrangements for the management of risk.
3.2 The Purpose of the System of Internal Control 3.2.1 The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives. It can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an on-going process designed to identify and prioritise the risks to achievement of the Council’s policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. 3.2.2 The system of internal control has been in place at Monmouthshire County Council for the year ended 31 March 2010 and up to the date of approval of the Statement of Accounts.
3.3 The Internal Control Environment 3.3.1 The key elements of Monmouthshire County Council’s internal control environment are as follows: i) Establishment and Monitoring the Achievement of the Council’s Objectives 3.3.2 The Council’s priorities and objectives are reviewed on an annual basis as part of the corporate planning cycle. Priorities are established by Cabinet in consultation with Corporate Directors and the Chief Executive, taking into account the Council's performance improvement priorities, inspection findings and public consultation. 3.3.3 The Corporate Plan identifies actions and resources over a three year period, the Improvement Plan establishes specific targets to measure progress and the Community Strategy presents the vision for the future which has been shaped with the help of local people. The Medium Term Financial Plan takes account of the financial implications of strategic decisions. Performance is reported to Cabinet Members bi-monthly for financial and quarterly for other performance information and is monitored by Select Committees. Performance information is available throughout the Council through Directorate Management Teams cascading information through management meetings.
ii) Facilitation of Policy and Decision Making 3.3.4 Monmouthshire County Council has adopted a Constitution, which came into effect on May 2002 (revised in May 2008). This sets out how the Council operates, how decisions are made and the procedures that are followed to ensure that these are efficient, transparent and accountable to local people. 3.3.5 The Cabinet is the part of the Council responsible for taking executive decisions. All Cabinet decisions are published on the Council’s internet site. The Cabinet has to make decisions that are in line with the Council’s overall policies and budget or that relate to the policy framework. Decisions outside the budget or policy must be taken by Council. 3.3.6 The Council operates a Select Committee process to review, scrutinise, measure and promote improvement in the provision of services and compliance with Council policies. In 2009-10, there were five Select Committees which supported the work of the Cabinet and the Council as a whole.
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3 STATEMENT ON INTERNAL CONTROL (CONTINUED)
ii) Facilitation of Policy and Decision Making (continued) 3.3.7 The Council has also established a Citizen’s Panel comprising a representative cross section of local citizens who have a greater say in Council affairs. This provides a forum to discuss local issues with the Council’s partner organisations and helps to shape the priorities and objectives of the Council.
iii) Ensuring Compliance with Established Policies, Procedures, Laws and Regulations 3.3.8 The Council has designated the Assistant Chief Executive (Corporate Governance) as the Monitoring Officer. It is the function of the Monitoring Officer to ensure compliance with established policies, procedures, laws and regulations. Corporate Directors and Heads of Service also ensure compliance within their respective areas of responsibility.
iv) Identifying, Assessing and Managing Risks to the Authority’s Objectives 3.3.9 The Council has robust systems in place for identifying and evaluating significant business risks which formulate the Joint Risk Assessment Template (RAT) and the Improvement Plan. The key elements of the system include: • The Council has adopted a Risk Management Process which aims to embed risk management into the culture and operations of the organisation. The aim is to manage risk in accordance with best practice and to make sure that service areas have clear accountability for both the ownership and cost of risk and the tools to effectively reduce it. Risks impacting on the objectives of each service area along with scope for mitigation are incorporated within all annual service plans and consequently within Delivery and Development (D&D) plans. • The Council has established roles and responsibilities and reporting lines within the Council for Risk Management, incorporating Risk Management into all new projects and reviews, the decision making process, business planning and performance Management processes. Council is ultimately responsible for Risk Management which is being championed by Corporate Directors and Heads of Service. • The Council agrees a joint risk assessment (RAT) with its external regulators annually. This is reported through Cabinet and the Audit and Accounts Select Committee. The Local Government Measure will replace the RAT in due course.
v) Ensuring the Economical, Effective and Efficient Use of Resources and Ensuring Continuous Improvement 3.3.10 The Council has a programme of continual improvement within the agreed Improvement Plan via the framework of service delivery plans. Compliance with the Council’s Financial Procedures, Financial Instructions and Contract Procedure Rules (CPRs) ensure consistency of approach in securing the economic, effective and efficient use of the resources and this is supported by the audit reviews undertaken by the internal audit team. The Council's CPRs were revised and updated in 2008-09 and were adopted by Council on 1st April 2009.
vi) Financial Management of the Authority and Reporting of Financial Management 3.3.11 The Council has continued to improve its financial management at an operational level through the continued development of financial reporting, forecasting of budgets and strategically through its medium-term planning of financial commitments. This is underpinned by: • A professional finance function; • Regular revenue and capital monitoring reports to Cabinet Members and Audit and Accounts Select Committee; • Comprehensive budgeting and closedown procedures;
9 Monmouthshire County Council Annual Accounts 2009-10
3 STATEMENT ON INTERNAL CONTROL (CONTINUED)
3.3 The Internal Control Environment (continued) vi) Financial Management of the Authority and Reporting of Financial Management (continued) • The Council has a Treasury Management Strategy that reflects the requirements of the CIPFA Code of Practice for Treasury Management in the Public Services; • Budget planning generally takes place over a 4-year cycle, with indicative budgets being approved for the second, third and forth years of the cycle. This enables the Council to ensure that its plans are affordable over the medium term and to consider early action in the context of any pressures that may be emerging; • Consultation is a key element of the budget process; • General budget risks are highlighted and managed; r • Prioritisation within financial planning is closely aligned with the Council’s wider corporate planning processes, the aim being to ensure that where funds become available they are applied to ensure that developments can be prioritised as planned; • Maintaining general reserves at agreed minimum levels and by review. vii) Performance Management of the Authority and Reporting of Performance Management 3.3.12 The Council has an agreed performance management strategy, to deliver an effective and fully integrated performance management framework, underpinned by an embedded performance management culture. Key elements of this strategy are the collection and dissemination of performance information through Directorate Management Teams and Delivery and Development plans, which establish ownership and accountability for performance among responsible officers, and the regular reporting of performance and improvement actions both corporately and per directorate. 3.3.13 Performance is reported against all national, policy and local Welsh Assembly Government targets to Heads of Service, Corporate Management Team and Select Committees.
3.4 Review of Effectiveness 3.4.1 The Council has responsibility for conducting, at least annually, a review of the effectiveness of the system of internal control. The review is informed, in part, by the work undertaken by internal audit and the senior managers within the Council, and also by comments made by the external auditors and other review agencies and inspectorates in their annual audit letter and other reports. Managers have the responsibility for the development and maintenance of the internal control environment. 3.4.2 The Council has approved the remit of the Audit and Accounts Committee, which is as follows: • Ensuring an effective internal control system is maintained within the context of a risk-based assessment; • Promoting internal audit, establishing a timetable to conduct reviews, to develop an anti-fraud and corruption culture and review financial procedures; • Focusing the Council's internal and external audit resources by agreeing audit plans and monitoring the provision, performance and adequacy of audit, including the actioning of audit recommendations. • Considering observations and concerns on individual services or service elements on the basis of reports by Council officers, members, the Wales Audit Office and internal and external audit. 3.4.3 The following process has been applied in maintaining and reviewing the system of internal control: • Reports to Council, Cabinet and Individual Cabinet Members;
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Monmouthshire County Council Annual Accounts 2009-10
4 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MONMOUTHSHIRE COUNTY COUNCIL
We have audited the accounting statements and related notes of Monmouthshire County Council for the year ended 31 March 2010 under the Public Audit (Wales) Act 2004. Monmouthshire County Councils’ accounting statements comprise the Income and Expenditure Account, Statement of Movement on Council Fund Balance, Statement of Total Recognised Gains and Losses, Balance Sheet, Cash Flow Statement, Housing Revenue Account Income and Expenditure Account and Statement of Movement on Housing Revenue Account Balance. The accounting statements have been prepared under the accounting policies set out in the Statement of Accounting Policies. This report is made solely to Monmouthshire County Council in accordance with Part 2 of the Public Audit (Wales) Act 2004 and for no other purpose, as set out in the Statement of Responsibilities prepared by the Auditor General for Wales.
Respective responsibilities of Head of Finance (Responsible Financial Officer) and the Independent Auditor The responsible financial officer’s responsibilities for preparing the statement of accounts, in accordance with relevant legal and regulatory requirements and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2009 are set out in the Statement of Responsibilities for the Statement of Accounts. Our responsibility is to audit the accounting statements and related notes in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the accounting statements and related notes give a true and fair view, in accordance with relevant legal and regulatory requirements and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2009, of the financial position of the local government body and its income and expenditure for the year. We review whether the Statement on Internal Control reflects compliance with ‘The statement on internal control in local government: meeting the requirements of the Accounts and Audit Regulations 2003’ published by CIPFA in April 2004 [‘Delivering Good Governance in Local Government: Framework’ published by CIPFA/SOLACE in June 2007]. We report if it does not comply with proper practices specified by CIPFA [CIPFA/SOLACE] or if the statement is misleading or inconsistent with other information we are aware of from our audit. We are not required to consider, nor have we considered, whether the Statement on Internal Control covers all risks and controls. Neither are we required to form an opinion on the effectiveness of the local government body’s corporate governance procedures or its risk and control procedures. We read other information published with the accounting statements, and related notes and consider whether it is consistent with the audited accounting statements and related notes. This other information comprises the Explanatory Foreword. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the accounting statements and related notes. Our responsibilities do not extend to any other information.
Basis of audit opinion We conducted our audit in accordance with the Public Audit (Wales) Act 2004 , the Code of Audit Practice issued by the Auditor General for Wales, and International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounting statements and related notes. It also includes an assessment of the significant estimates and judgments made by the local government body in the preparation of the accounting statements and of whether the accounting policies are appropriate to the local government body’s circumstances, consistently applied and adequately disclosed.
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4 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MONMOUTHSHIRE COUNTY COUNCIL (CONTINUED)
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the accounting statements and related notes are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounting statements and related notes.
Opinion on the accounting statements of Monmouthshire County Council In our opinion the accounting statements and related notes give a true and fair view, in accordance with relevant legal and regulatory requirements and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2009, the financial position of Monmouthshire County Council as at 31 March 2010 and its income and expenditure for the year then ended.
Conclusion on arrangements for securing economy, efficiency and effectiveness in the use of resources My conclusion on Monmouthshire County Council’s arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2010 will be reported separately in the published Annual Audit Letter.
Certificate We certify that we have completed the audit of the accounts of Monmouthshire County Council in accordance with the requirements of the Public Audit (Wales) Act 2004 and the Code of Audit Practice issued by the Auditor General for Wales. The maintenance and integrity of the Monmouthshire County Council web site is the responsibility of the local government body. The work carried out by the auditor does not involve consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the statement of accounts since it was initially presented on the web site.
SignatureANTHONY BARRETT Date 30/09/2010
Anthony Barrett Appointed Auditor Wales Audit Office 24 Cathedral Road Cardiff CF11 9LJ
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5 STATEMENT OF ACCOUNTING POLICIES
5.1 General Principles 5.1.1 The Statement of Accounts summarises the Authority's transactions for the 2009/10 financial year and its position at the year-end of 31 March 2010. It has been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom - A Statement of Recommended Practice 2009 (the SORP). The accounting convention adopted is historical cost, modified by the revaluation of certain categories of tangible fixed assets. 5.1.2 The Statement of Recommended Practice on the application of Statements of Standard Accounting Practice (SSAPs) and Financial Reporting Standards (FRSs) to Local Authorities which is issued by the Accounting Standards Board have also been observed. 5.1.3 The Accounts have been prepared in compliance with the pervasive accounting concepts of Accruals and Going Concern, as required by FRS18 ("Accounting Policies"), and also with the concept of the primacy of legislative requirements, as required by the SORP (The Code of Practice). The former concepts of Consistency and Prudence have been downgraded to desirable objectives for assessing accounting policies, with Neutrality taking precedence over Prudence. The Code of Practice still requires compliance with the concept of Materiality.
5.2 Accruals of Income and Expenditure 5.2.1 Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular: • Fees, charges and rents due from customers are accounted for as income at the date the Council provides the relevant goods or services. • Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption, they are carried as stocks on the balance sheet where such balances are considered material. • Works are charged as expenditure when they are completed, before which they are carried as works in progress on the balance sheet. • Interest payable on borrowings and receivable on investments is accounted for on the basis of the effective interest rate for the relevant financial instruments rather than the cash flows fixed or determined by the contract. • Where income and expenditure has been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the balance sheet. Where it is doubtful that debts will be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected.
5.3 Provisions 5.3.1 Provisions are made where an event has taken place that gives the Authority an obligation that probably requires settlement by a transfer of economic benefits, but where the timing of the transfer is uncertain. For instance, the Authority may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation. 5.3.2 Provisions are charged to the appropriate revenue account when the authority becomes aware of the obligation, based on the best estimate of the likely settlement. When payments are eventually made, they are charged to the provision set up in the balance sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes more likely than not that a transfer of economic benefits will not be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service revenue account.
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5.3 Provisions (continued) 5.3.3 Where some or all of the payment required to settle a provision is expected to be met by another party (eg from an insurance claim), this is only recognised as income in the relevant service revenue account if it is virtually certain that reimbursement will be received if the obligation is settled.
5.4 Reserves 5.4.1 The Authority sets aside specific amounts as reserves for future policy purposes or to cover contingencies, be it revenue or capital in nature. Reserves are created by appropriating amounts via the Statement of Movement on the Council Fund Balance. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service revenue account in that year to score against the Net Cost of Services in the Income and Expenditure Account. The reserve is then appropriated back into the Council Fund via the Statement of Movement on the Council Fund Balance so that there is no net charge against council tax for the expenditure. 5.4.2 Certain reserves are kept to manage the accounting processes for tangible fixed assets and retirement benefits. These reserves do not represent usable resources for the Authority – these reserves are explained in the relevant policies below. 5.4.3 Notes 11.19 to 11.30 to the Accounts on pages 61 to 68 provide more information on the reserves held by the Authority.
5.5 Government Grants and Contributions (Revenue) 5.5.1 Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as income at the date that the authority satisfies the conditions of entitlement to the grant/contribution, there is reasonable assurance that the monies will be received and the expenditure for which grant is given has been incurred. 5.5.2 Revenue grants are matched in service revenue accounts with the service expenditure to which they relate. Grants to cover general expenditure (eg Revenue Support Grant) are credited to the foot of the Income and Expenditure Account after Net Operating Expenditure.
5.6 Retirement Benefits 5.6.1 Authority employees are members of two separate pension schemes: • The Teachers' Pension Scheme, administered by Capita Teachers' Pensions on on behalf of the Department for Children, Schools and Families (DCSF). • The Local Government Pensions Scheme, administered by Torfaen County Borough Council 5.6.2 Both schemes provided defined benefits to members (retirement lump sums and pensions), earned as employees when they worked for the Authority and related to final salary and length of service. 5.6.3 However, the arrangements for the teachers' scheme mean that liabilities for these benefits cannot be identified to the Authority. The scheme is therefore accounted for as if it were a defined contributions scheme - no liability for future payment of benefits is recognised in the balance sheet and the education service revenue account are charged with the employer's contributions payable to Teachers' Pensions in the year.
The Local Government Pension Scheme 5.6.4 All other staff, subject to certain qualifying criteria, are entitled to become members of the Local Government Pension Scheme which is administered by Torfaen County Borough Council. The pension costs charged to the Authority’s accounts in respect of this group of employees is determined by the fund administrators and represents a fixed proportion of employees’ contributions to this funded pension scheme.
15 Monmouthshire County Council Annual Accounts 2009-10
5.6 Retirement Benefits (continued) The Local Government Pension Scheme (continued) 5.6.5 The Local Government Scheme is accounted for as a defined benefit scheme: • The Liabilities of the pension fund attributable to the Authority are included in the balance sheet on an actuarial basis using the projected unit method - i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions such as mortality rates, employee turnover rates, etc, and projections of earning for current employees. • Liabilities are discounted to their value at current prices, using a discount rate calculated as a weighted average of "spot yields" on AA rated corporate bonds. The weightings used in the approach are designed by the Actuary to reflect approximately the duration of the pension liabilities of the Authority. • The assets of the Greater Gwent (Torfaen) Pension Fund attributable to the Authority are included in the balance sheet at their fair value, as determined by the Fund's actuary being: • The change in the net pensions liability is analysed into seven components: - Current Service Cost - the increase in liabilities as a result of years of service earned this year - allocated in the Income and Expenditure account to the revenue accounts of services for which the employees worked. - Past Service Cost - the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years - charged to Net Cost of Services in the Income and Expenditure Account as part of Non-Distributed Costs - Interest Cost - the expected increase in the present value of liabilities during the year as they move one year closer to being paid - charged to Net Operating Expenditure in the Income and Expenditure Account. - Expected Return on Assets - the annual investment return on the fund assets attributable to the Authority, based on an average of the expected long-term return - credited to Net Operating Expenditure in the Income and Expenditure Account. - Gains/Losses on Settlements and Curtailments - the result of actions to relieve the Authority of liabilities or events that reduce the expected future service or accrual of benefits of employees - charged to the Net Cost of Service in the Income and Expenditure Account as part of Non-Distributed Costs. - Actuarial Gains and Losses - changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions - charged to the Statement of Total Recognised Gains and Losses. - Contributions paid to the Pension Fund - cash paid as employer's contributions to the pension fund 5.6.6 In relation to retirement benefits, statutory provisions require the Council Fund balance to be charged with the amount payable by the Authority to the pension fund in the year, not the amount calculated according to the relevant accounting standards. In the Statement of Movement on the Council Fund Balance this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with the charge for the cash paid to the pension fund and any amounts payable to the fund but unpaid at the year- end. 5.6.7 Further details are given in note 11.31 to the Financial Statements.
16 Monmouthshire County Council Annual Accounts 2009-10
5.6 Retirement Benefits (continued) 5.6.8 The impact of accounting for FRS17 Retirement Benefits as analysed in 5.6.5 has had the following effects on the results of the prior and current periods: • The overall amount to be met from Government grants and local taxation has remained unchanged, but the costs disclosed for individual services are 3.9% lower (1.4% lower in 2008/09) after the replacement of employer’s contributions by current service costs and Net Operating Expenditure is 1.6% higher (1.3% higher in 2008/09) than it would otherwise have been. • The requirement to recognise the net pensions liability in the balance sheet has reduced the reported net worth of the authority by 80.3% (reduced by 59.1% in 2008/09).
Discretionary Benefits 5.6.9 The Authority also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme.
5.7 VAT 5.7.1 Income and expenditure excludes any amounts relating to VAT, as all VAT collected is payable to HM Revenue and Customs and all VAT paid is recoverable from them, to the extent that it is recoverable.
5.8 Overheads and Support Services 5.8.1 The costs of overheads and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Best Value Accounting Code of Practice 2008 (BVACOP). The total absorbtion costing principle is used - the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of:
• Corporate and Democractic Core - costs relating to the Authority's status as a multi- functional democractic organisation.
• Non-Distributed Costs - the cost of discretionary benefits awarded to employees retiring early and any depreciation and impairment losses chargeable on non-operational properties. 5.8.2 These two cost categories are defined in BVACOP and are accounted for as separate headings in the Income and Expenditure Accounts, as part of Net Cost of Services. 5.8.3 The costs of support services are not recharged or repatriated where they are deemed not to materially distort the reported total costs of other services.
5.9 Intangible Fixed Assets 5.9.1 Expenditure on assets that do not have physical substance but are identifiable and controlled by the Authority (eg software licences) is capitalised when it will bring benefits to the Authority for more than one financial year. 5.9.2 Intangible assets are held at historic cost and are amortised on a straight-line basis to the relevant revenue account over the economic life of the investment to reflect the pattern of consumption of benefits. Economic lives are determined locally on an individual asset basis.
5.10 Tangible Fixed Assets 5.10.1 Tangible fixed assets are assets that have physical substance and are held for use in the provision of services or for administrative purposes on a continuing basis.
17 Monmouthshire County Council Annual Accounts 2009-10
5.10 Tangible Fixed Assets (continued) Recognition 5.10.2 Expenditure on the acquisition, creation or enhancement of tangible fixed assets is capitalised on an accruals basis, provided that it yields benefits to the Authority and its services for more than one financial year and exceeds the relevant de minimus limit in place. Different de-minimus limits are in place for different categories of asset. These are: • Land and Buildings - no de minimus limit • Vehicles - no de minimus limit • IT Equipment - £10,000 • Plant and Machinery - £5,000 5.10.3 Expenditure that secures but does not extend the previously assessed standards of performance of assets (eg repairs and maintenance) is charged to revenue as it is incurred.
Measurement 5.10.4 Assets are initially measured at cost, comprising all expenditure that is directly attributable to bringing the asset into working condition for its intended use. Assets are then carried in the balance sheet using the following measurement bases: • Investment properties and assets surplus to requirements – lower of net current replacement cost or net realisable value. • Dwellings, other land and buildings – lower of net current replacement cost or net realisable value in existing use. • Infrastructure assets – depreciated historical cost. • Community Assets - depreciated replacement cost or existing use value. • Vehicles, Plant and Equipment - historic cost as a proxy for current value. Net current replacement cost is assessed as: • Non-specialised operational properties – existing use value. • Specialised operational properties – depreciated replacement cost. • Investment properties and surplus assets – market value. 5.10.5 Assets included in the balance sheet at current value are revalued where there have been material changes in the value, but as a minimum every five years. Increases in valuations are matched by credits to Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Income and Expenditure Account where they arise from the reversal of an impairment loss previously charged to a revenue account. 5.10.6 The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account.
Impairment 5.10.7 The values of each category of assets and of material individual assets that are not being depreciated are reviewed at the end of each financial year for evidence of reductions in value. Where impairment is identified as part of this review or as a result of a valuation exercise, this is accounted for as follows: • Where attributable to the clear consumption of economic benefits – the loss is charged to the relevant service revenue account. • Otherwise – written off against any revaluation gains attributable to the relevant asset in the Revaluation Reserve with any excess charged to the relevant service revenue account.
18 Monmouthshire County Council Annual Accounts 2009-10
5.10 Tangible Fixed Assets (continued) Impairment (continued) 5.10.8 Where an impairment loss is charged to the Income and Expenditure Account but there were accumulated revaluation gains in the Revaluation reserve for that asset, an amount up to the value of the loss is transferred from the Revaluation Reserve to the Capital Adjustment Account.
Disposals 5.10.9 When an asset is disposed of or decommissioned, the value of the asset in the balance sheet is written off to the Income and Expenditure Account as part of the gain or loss on disposal. Receipts from disposals are credited to the Income and Expenditure Account as part of the gain or loss on disposal (i.e. they are netted off against the carrying value of the asset at the time of the disposal). Any revaluation gains are transferred to the Capital Adjustment Account. 5.10.10 Amounts in excess of £10,000 are categorised as capital receipts. The balance of receipts is required to be credited to the Useable Capital Receipts Reserve, and can then only be used for new capital investment or set aside to reduce the Council’s underlying need to borrow (the capital financing requirement). Receipts are appropriated to the Reserve from the Statement of Movement on the Council Fund Balance. 5.10.11 The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Fixed Asset Restatement Account from the Statement of Movement on the Council Fund Balance.
Depreciation 5.10.13 Depreciation is provided for on all assets with a determinable finite life (except for investment properties and community assets), by allocating the value of the asset in the balance sheet over the periods expected to benefit from their use. 5.10.14 Deprecation is calculated on the following bases: • Dwellings and other buildings – straight-line allocation over the life of the property as estimated by the valuer • Vehicles, plant and equipment – straight-line allocation over the life of the asset as advised by a suitable qualified officer • Infrastructure – straight-line allocation over 60 years. 5.10.15 Where an asset has major components with different estimated useful lives, these are depreciated separately. 5.10.16 Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.
Capital Grants and Contributions 5.10.17 Where grants and contributions are received that can be matched to expenditure on fixed assets with a finite useful life, the amounts are credited to the Government Grants Deferred Account. The balance is then written down to revenue to offset depreciation charges made for the related assets in the relevant service revenue account, in line with the depreciation policy applied to them.
19 Monmouthshire County Council Annual Accounts 2009-10
5.11 Charges to Revenue for Fixed Assets 5.11.1 Service revenue accounts, support services and trading accounts are debited with the following amounts to record the real cost of holding fixed assets during the year: • Depreciation attributable to the assets used by the relevant service. • Impairment losses attributable to the clear consumption of economic benefits on tangible fixed assets used by the service and other losses where there are accumulated gains in the Revaluation Reserve against which they can be written off. • Amortisation of intangible fixed assets attributable to the service. 5.11.2 The Authority is not required to raise council tax to cover depreciation, impairment losses or amortisations. However, it is required to make an annual provision from revenue (MRP) to contribute towards the reduction in its overall borrowing requirement (equal to an amount calculated on a prudent basis detemined by the Authority in accordance with statutory guidance and its approved MRP policy). 5.11.3 Depreciation, impairment losses and amortisations are therefore replaced by revenue provision in the Statement of Movement on the Council Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account for the difference between the two.
5.12 Revenue Expenditure Funded from Capital under Statute 5.12.1 Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of fixed assets has been charged as expenditure to the relevant service revenue account in the year. Where the Authority has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer to the Capital Adjustment Account then reverses out the amounts charged in the Statement of Movement on the General Fund Balance so there is no impact on the level of council tax.
5.13 Leases Finance Leases 5.13.1 The Authority accounts for leases as finance leases when substantially all the risks and rewards relating to the leased asset transfer to the Authority. Rentals payable are apportioned between: • A charge for the acquisition of the interest in the asset (recognised as a liability in the balance sheet at the start of the lease, matched with a tangible fixed asset – the liability is written down as the rental becomes payable); • A finance charge (debited to Net Operating Expenditure in the Income and Expenditure Account as the rental becomes payable); and • An accelerated revenue provision equal to the principal repayments made, taken to the Capital Adjustment Account via the Statement of Movement in the Council Fund Balance. 5.13.2 Fixed assets recognised under finance leases are accounted for using the policies applied generally to Tangible Fixed Assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life.
Operating Leases 5.13.3 Leases that do not meet the definition of finance leases are accounted for as operating leases. Rentals payable are charged to the relevant service revenue account on a straight-line basis over the term of the lease, generally meaning that rentals are charged when they become payable.
20 Monmouthshire County Council Annual Accounts 2009-10
5.14 Private Finance Initiative (PFI) 5.14.1 With effect from 2009/10, the accounting requirements for PFI and similar contracts are no longer based on the UK accounting standard FRS5 but on International Financial Reporting Standards (IFRS). The requirements are based on IFRIC12 Service Concession Arrangements interpreted for concession grantors (the Authority in this instance) and is consistent with the approach adopted by the Governments IFRS-based Financial Reporting Manual (the iFReM). 5.14.2 This change represents a change in accounting policy and the accounts have been updated accordingly, with prior year adjustments being made. Statutory guidance has been issued by the Welsh Assembly Government that allows the impact on the Authority's funding position to be ameliorated. 5.14.3 PFI contracts are agreements to receive services, where the responsibility for making available the fixed assets needed to provide the services passes to the PFI contractor. As the Authority is deemed to control the services that are provided under its PFI schemes and as ownership of the fixed assets will pass to the council at the end of the contracts for no additional charge, the council carries the fixed assets used under the contracts on the Balance Sheet. 5.14.4 The original recognition of these fixed assets was balanced by the recognition of a liability for amounts due to the scheme operator to pay for the assets. 5.14.5 Fixed assets recognised on the Balance Sheet are revalued and depreciated in the same way as property, plant and equipment owned by the council. 5.14.6 The amounts payable to the PFI operators each year are analysed into five elements: • Fair value of the services received during the year – debited to the relevant service in the Income and Expenditure Account • Finance cost – an interest charge on the outstanding Balance Sheet liability, debited to Interest Payable and Similar Charges in the Income and Expenditure Account • Contingent rent – increases in the amount to be paid for the property arising during the contract, debited to Interest Payable and Similar Charges in the Income and Expenditure Account • Payment towards liability – applied to write down the Balance Sheet liability towards the PFI operator • Lifecycle replacement costs – recognised as fixed assets on the Balance Sheet.
5.15 Financial Liabilities 5.15.1 Financial liabilities are initially measured at fair value and carried at their amortised cost. Annual charges to the Income and Expenditure Account for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. For most of the borrowings that the Authority has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest) and interest charged to the Income and Expenditure Account is the amount payable for the year in the loan agreement. 5.15.2 However, one stepped loan held by the Authority is carried at a higher amortised cost than the outstanding principal, and interest is charged at a marginally lower effective rate of interest than the interest payable under the terms of the loan contract. 5.15.3 Gains and losses on the repurchase or early settlement of borrowing are credited and debited to Net Operating Expenditure in the Income and Expenditure Account in the year of repurchase/settlement. 5.15.4 However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the Income and Expenditure Account is spread over the life of the loan by an adjustment to the effective interest rate.
21 Monmouthshire County Council Annual Accounts 2009-10
5.15 Financial Liabilities (continued) 5.15.5 Where premiums and discounts have been charged to the Income and Expenditure Account, regulations allow the impact on the Council Fund Balance to be spread over future years. 5.15.6 The Authority has a policy of spreading any loss over the term that was remaining on the loan against which the premium was payable and any gain over lesser of the term remaining on the loan against which the discount was receivable or 10 years. The reconciliation of amounts charged to the Income and Expenditure Account to the net charge required against the Council Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Statement of Movement on the Council Fund Balance.
5.16 Financial Assets – Loans and Receivables 5.16.1 Loans and receivables are initially measured at fair value and carried at their amortised cost. Annual credits to the Income and Expenditure Account for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. 5.16.2 For most of the loans that the Authority has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Income and Expenditure Account is the amount receivable for the year in the loan agreement. 5.16.3 The Authority has made one loan at less than market rates (soft loans) for policy reasons. Due to the immaterial nature of the loan, it is recorded in the balance sheet at the value of the principal outstanding. 5.16.4 Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the Income and Expenditure Account. 5.16.5 Any gains and losses that arise on the derecognition of the asset are credited/debited to the Income and Expenditure Account.
5.17 Stocks and Work in Progress 5.17.1 Stocks are valued at the latest price paid, with an allowance made for obsolescent and slow moving items. This is a departure from the requirements of the Code of Practice and SSAP9 which require stocks to be shown at the lower of actual cost and net realisable value. However, the amounts concerned are not considered material. 5.17.2 Work in progress is subject to an interim valuation at the year-end and recorded in the balance sheet at cost plus any profit reasonably attributable to the works.
5.18 Interests in Companies and Other Entities 5.18.1 The SORP requires authorities to enhance their statement of accounts with information about any interest in subsidiaries, associates and joint ventures in a set of group accounts. 5.18.2 These accounting requirements result in the consolidation of the transactions and balances of subsidiaries and of interests in associates and joint ventures, thus ensuring group accounts provide a complete picture of the authority’s control over other entities. 5.18.3 In the Authority’s own single-entity accounts, it is the Authority's policy to disclose as a note to the balance sheet details of the name, business, shareholding, net assets and results of operations and other financial transactions of any related companies.
5.19 Creditor Payment Policy 5.19.1 It is the Authority’s policy to pay creditors promptly, without undue delay and within mutually agreed terms. 71.2% of payments were paid within a 30 day target settlement date (70.6% in 2008/09).
22 Monmouthshire County Council Annual Accounts 2009-10
SECTION 6
Income and Expenditure Account for the year ended 31st March 2010 Monmouthshire County Council Annual Accounts 2009-10
INCOME & EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31 MARCH 2010
2008/09 2009/10 2009/10 2009/10
Net Gross Gross Net Expenditure Expenditure Income Expenditure Restated £000s Note £000s £000s £000s
6,526 Central services 38,412 (31,809) 6,603 26,301 Cultural, environment and planning services 31,803 (11,846) 19,957 117,663 Children's and Education Services 84,490 (23,145) 61,345 27,531 Adult Social Care 33,945 (7,249) 26,696 16,729 Highways, road and transport services 25,234 (10,040) 15,195 256 Local authority housing (HRA) (1) 0 (1) 2,100 Other housing services 5,032 (3,032) 2,000 1,256 Corporate and democratic core 2,531 (1,128) 1,402 149 Non distributed costs (85) 0 (85) 0 Exceptional item - equal pay and single 11.18b 5,542 0 5,542 status provision
198,511 Net Cost of Services 226,903 (88,249) 138,655
91 (Gain)/Loss on the disposal of fixed assets 11.2 (393) Precepts and levies: 6,954 Gwent Police Authority 7,271 4,311 South Wales Fire and Rescue Authority 4,373 1,219 Community and Town Councils 1,300 123 National Parks 124 108 Internal Drainage Boards 113 213 (Surpluses)/deficits on trading 11.3 (145) undertakings not included in the Net Cost of Services 4,753 Interest payable and similar charges 11.13 4,240 381 Investment losses 11.13 (75) (3,397) Interest and investment income 11.13 (719) 5,788 Pensions interest cost and expected return 11.31 8,213 on pension assets 219,055 Net Operating Expenditure 162,956 (46,438) Council Tax 11.4 (49,044) (71,542) General government grants 11.5 (74,497) (23,079) Non-domestic rates redistribution 11.6 (23,744) 77,996 (Surplus)/Deficit for the year 15,671
The Authority transferred its council housing stock and related functions in January 2008 to Monmouthshire Housing Association. Whilst Income and expenditure directly related to discontinued operations should be shown separately on the face of the Income and Expenditure Account under the heading of Discontinued Operations, such functions are already separately reported above under the heading "Local Authority Housing (HRA). These operations are also separately reported through supplementary statements and notes per section 12 to 14 to the Accounts.
24 Monmouthshire County Council Annual Accounts 2009-10
SECTION 7
Statement of Movement on the Council Fund Balance for the Year Ended 31st March 2010 Monmouthshire County Council Annual Accounts 2009-10
STATEMENT OF MOVEMENT ON THE COUNCIL FUND BALANCE FOR THE YEAR ENDED 31 MARCH 2010 2008/09 2009/10 £000s Note £000s Restated 77,996 (Surplus)/Deficit for the year on the Income and Expenditure Account 15,671 Amounts included in the income and Expenditure Account but required by statute to be excluded when determining the Movement of the Council Fund Balance for the year (10) Amortisation and impairment of intangible fixed assets 11.7d (349) (82,571) Depreciation and impairment of fixed assets 11.7i (19,302) 3,210 Government Grants Deferred amortisation 11.12 5,945 (865) Amounts treated as revenue expenditure in accordance with the SORP 11.8 (1,783) but which are classified as capital expenditure by statute (47) Net gain/(loss) on sale of fixed assets 11.2 492 170 Differences between amounts debited/credited to the Income and 11.30 (6) Expenditure Account and amounts payable/receivable to be recognised under statutory provisions relating to soft loans and premiums and discounts on the early repayment of debt (12,779) Net charges made for retirement benefits in accordance with FRS 17 11.31 (12,961) (92,892) (27,964) Amounts not included in the Income and Expenditure Account but required to be included by statue when determining the Movement on the Council Fund Balance for the year 3,041 Minimum revenue provision for capital financing 11.11 3,232 1,554 Capital expenditure charged in year to the Council Fund Balance 11.7m 1,628 9,930 Employer's contributions payable to the Greater Gwent Pension Fund 11.31 10,378 and retirement benefits payable direct to pensioners 14,525 15,238 Transfer to or from the Council Fund Balance that are required to be taken into account when determining the Movement on the Council Fund Balance for the year (147) Housing Revenue Account Balance 1 19 Net transfer to/(from) earmarked reserves 11.21 (2,643) (128) (2,642)
(499) (Increase)/Decrease in Council Fund Balance for the Year 304
(6,139) Council Fund Balance brought forward (6,638) (6,638) Council Fund Balance carried forward (6,334) (1,571) Amount of Council Fund Balance held by Schools under Local 11.22 (1,284) Management Schemes (5,066) Amount of Council Fund Balance generally available for new expenditure 11.20 (5,050) (6,638) (6,334)
26 Monmouthshire County Council Annual Accounts 2009-10
SECTION 8
Statement of Total Recognised Gains and Losses for the Year Ended 31st March 2010 Monmouthshire County Council Annual Accounts 2009-10
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 MARCH 2010
2008/09 2009/10 £000s £000s
77,996 (Surplus)/deficit for the year on the Income and Expenditure Account 15,671 (16,447) (Surplus)/deficit arising on the revaluation of fixed assets (3,443) (11,907) Actuarial (gains)/losses on pension fund assets and liabilities 32,045
49,642 44,273
28 Monmouthshire County Council Annual Accounts 2009-10
SECTION 9
Consolidated Balance Sheet for the Year ended 31st March 2010 Monmouthshire County Council Annual Accounts 2009-10
BALANCE SHEET AS AT 31 MARCH 2010
2008/09 2009/10 £000s Note £000s £000s Restated Fixed Assets 91 Intangible Fixed Assets 11.7d 121 223,549 Operational Assets 11.7a 229,943 27,863 Non-Operational Assets: 11.7c 27,958 251,503 Total fixed assets 258,022 0 Long-term investments 11.13 346 1,074 Long-term debtors 11.14 998 252,577 Total long-term assets 259,366 Current Assets 276 Stocks and work in progress 11.15 299 20,417 Debtors 11.16 24,878 38,876 Investments 11.13 36,321 110 Cash and Bank 118 59,679 61,616 312,256 Total Assets 320,982 Current Liabilities (897) Short-term borrowing 11.13 (1,028) (23,294) Creditors 11.17 (24,186) (5,029) Bank Overdraft (8,130) (29,220) (33,344) 283,036 Total assets less current liabilities 287,638 Long-term liabilities (72,465) Long-term borrowing 11.13 (78,292) (1,667) Provisions 11.18 (6,433) (25,563) Government Grants deferred 11.12 (29,199) (306) Deferred liabilities (353) (103,791) Liability related to defined benefit pension scheme 11.31 (138,419) (977) Other Long-Term Liabilities (948)
(204,769) (253,644) 78,267 Total assets less liabilities 33,994 Financed by: 17,728 Revaluation Reserve 11.29 19,540 127,255 Capital Adjustment Account 11.24 122,978 12,371 Useable Capital Receipts Reserve 11.26 8,174 73 Deferred Capital Receipts 11.27 42 (103,791) Pensions reserve 11.23 (138,419) (556) Financial Instruments Adjustment Account 11.30 (562) 6,638 Council Fund balance 11.20 6,334 3,353 Housing Revenue Account balance 11.20 3,354 15,196 Earmarked reserves 11.21 12,553 78,267 Total net worth 33,994
30 Monmouthshire County Council Annual Accounts 2009-10
SECTION 10
Cash Flow Statement for the Year Ended 31st March 2010 Monmouthshire County Council Annual Accounts 2009-10
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2010
31 March 31 March 2009 2009 Note £000 £000 £000 £000 Restated Restated
Net Cash (Inflow)/Outflow from Revenue Activities 11.32 (10,260) (4,087)
Returns on Investments and Servicing of Finance Cash outflows Interest paid 4,227 5,270 Interest element of finance lease rental payments 27 29 4,254 5,299 Cash Inflows Interest received (1,004) (3,756) 3,250 1,543 Capital Activities Cash outflows Purchase of fixed assets 26,977 19,936 Purchase of Long Term Investments 346 0 Other capital cash payments 1,783 1,235 29,106 21,171
Cash Inflows Sale of fixed assets (2,406) (1,921) Long Term Investments maturing in year 0 (50) Capital grants received (9,612) (6,271) Other capital cash receipts 961 (700) (11,057) (8,942) 18,049 12,229
Net cash (inflow)/outflow before financing 11,039 9,685
Management of Liquid Resources Net increase/(decrease)in short-term deposits 11.34 (2,067) (27,769) (2,067) (27,769) Financing Cash Outflows Repayments of amounts borrowed 11.34 96 18,355 Capital element of finance lease rental payments 25 33
Cash Inflows New loans raised (6,000) 0 Discount received on repayment of debt 0 (175) (5,879) 18,213
(Increase)/Decrease in Cash 11.33 3,093 129
32 Monmouthshire County Council Annual Accounts 2009-10
SECTION 11
Notes to the Accounts for the Year Ended 31st March 2010 Monmouthshire County Council Annual Accounts 2008-09
INCOME AND EXPENDITURE ACCOUNT NOTES
11.1 Locally Determined Expenditure Analysis The SORP requires that authorities present the Net Cost of Services within the Income and Expenditure Account using the Service Expenditure Analysis set out in the Best Value Accounting Code of Practice (BVACOP). The Authority reports to its Members and Senior Management based on a locally determined service expenditure analysis that aligns with the internal Directorate structure of the Authority. In order to assist the reader of the accounts, the Income and Expenditure Account and Statement of Movement in the Council Fund balance are produced below in a summary format that more closely aligns with the Authority's internal management structure. Directly managed expenditure is expenditure that has a direct impact on the Authority's Council Fund balance, whereas indirectly managed expenditure has no net effect on the Authority Council Fund balance. Activity in respect of the Housing Revenue Account and schools have not been consolidated into the summary shown as it is separately reported as part of the Authority's reporting framework. Information on the Housing Revenue Account is reported separately in the statement on pages 88 to 94. Information on schools is reported in note 11.22 to the Accounts.
2009/10 2009/10 2009/10 Net Net Net Expenditure Expenditure Expenditure Direct Indirect Total £000s £000s £000s Social and Housing Services Directorate 34,776 663 35,439 Lifelong Learning and Leisure Directorate 54,668 6,433 61,101 Regeneration, Environment and Resources Directorate 27,782 6,452 34,234 Chief Exective's Department 3,428 (616) 2,812 Corporate Costs and Levies 15,368 (2,447) 12,921 Exceptional item - equal pay provision 5,542 0 5,542 Net Cost of Services (Locally Determined) 141,564 10,485 152,049 Interest & Investment Income (718) 0 (718) Investment Losses (75) 0 (75) Interest Payable and Similar Charges 4,258 0 4,258 Loss on the disposal of fixed assets 99 (493) (394) Pensions interest cost and expected return on pension assets 0 8,213 8,213 Net Operating Expenditure 145,128 18,205 163,333 Council Tax (49,044) 0 (49,044) General government grants (74,497) 0 (74,497) Non-domestic rates redistribution (23,744) 0 (23,744) Deficit for the year on Income and Expenditure Account (2,157) 18,205 16,048 Charges required under Regulation 3,188 (18,205) (15,017) Contribution to earmarked reserves 8,136 0 8,136 Contribution from earmarked reserves (9,730) (1,048) (10,778) Capital expenditure financed from revenue 580 1,048 1,628 Increase in Council Fund Balance for the Year (Authority) 17 0 17 Add: Net movement on LMS School Balances 287 Increase in Council Fund Balance for the Year (Total) 304
34 Monmouthshire County Council Annual Accounts 2009-10
11.2 Gains and Losses on the Disposal of Fixed Assets The net gain on the disposal of fixed assets for the year amounted to £393,000 (£91,000 net loss in 2008/09). The following analysis is provided to support the net gains: 31 March 2009 £000 £000 Sales Proceeds (2,357) (1,844) Carrying value of assets disposed of 1,865 1,891 Balance on Government Grants Deferred account 0 0 (492) 47 Attributable costs of disposal 99 44 Net (Gain)/Loss on Disposal of Fixed Assets (393) 91
Sales proceeds exclude deferred capital receipts, the receipt of which has been accrued in previous financial years.
11.3 Significant Trading Operations For 2009/10, the net deficit on significant trading operations amounted to £86,000 (£651,000 net deficit for 2008/09). The results of such undertakings are summarised below with further analysis being provided in the supplementary disclosures. The net surplus on trading undertakings shown on the face of the income and expenditure account of £145,000 (£213,000 net surplus for 2008/09) differs from that reported in this note as surplus and deficits generated on internal trading have been repatriated back to services within the income and expenditure account. However, this note shows the overall performance of trading operations. 2008-09 Income Expenditure (Surplus)/ (Surplus)/ Deficit Deficit £000 £000 £000 £000
Building Control Trading Account (290) 521 231 292 Retail Markets (286) 204 (82) (26) Industrial Units (193) 26 (167) (95) Wentwood Timber Centre (91) 108 17 55 Highways External Trading Functions (5,351) 5,317 (34) 60 Direct Services Organisation Trading (10,129) 10,250 121 365 Operations (16,340) 16,426 86 651
Highways External Trading Functions principally comprise works awarded to the Authority through competitive tender from the South Wales Trunk Road Agency (SWTRA).
35 Monmouthshire County Council Annual Accounts 2009-10
11.3 Significant Trading Operations (continued) a) Direct Services Organisation Trading Operations As a result of the repeal of the provisions of the Local Government Planning and Land Act 1980, and Direct Services Organisations (Refuse Collection etc.) under the provisions of the Local Government Act 1988, and its replacement by the provisions for trading accounts in the Best Value Accounting Code of Practice, the Authority is continuing to account separately for a number of the Direct Service Organisation trading operations. Details of the results of these operations are shown below. 2008-09 Income Expenditure (Surplus)/ (Surplus)/ Deficit Deficit £000 £000 £000 £000 Construction 6 (3) 3 22 Grounds maintenance (3,714) 3,758 44 103 Transport (4,032) 4,200 168 282 Schools catering (1,317) 1,264 (53) (29) Building cleaning (1,072) 1,031 (41) (13) (10,129) 10,250 121 365
Upon transfer of the Authority's council housing stock in January 2008, the construction unit transferred to Monmouthshire Housing Association . The costs illustrated above comprise residual costs to the Authority. b) Building Control Trading Account The Building (Local Authority Charges) Regulations 1998 require the disclosure of information regarding the setting of charges for the administration of the building control function. However, certain activities performed by the building control unit cannot be charged for, such as providing general advice and liasing with other statutory authorities. The statement below shows the total cost of operating the building control unit divided between the chargeable and non-chargeable activities.
Building Regulations Charging Non- Account 2009/10 Chargeable Chargeable Total £000 £000 £000 Expenditure Employee expenses 235 197 432 Premises 0 8 8 Transport 0 0 0 Supplies & Services 16 33 49 Agency & Contracted 8 0 8 Central and Support services recharges 19 20 39 Movement in Bad Debt Provision (7) (8) (15) Total Expenditure 271 250 521 Income Building Regulation Charges (286) (3) (289) Miscellaneous Income 0 (1) (1) Total Income (286) (4) (290) (Surplus)/deficit for Year (15) 246 231
Comparatives for 2008/09 Expenditure 325 276 601 Income (309) 0 (309) (Surplus)/deficit for Year 16 276 292
36 Monmouthshire County Council Annual Accounts 2009-10
11.3 Significant Trading Operations (continued) c) Retail Markets The financial results for the retail markets, provided by the Authority, are as follows:- 2008-09 £000 £000 Income from Stallholders (286) (319) Expenditure 204 293 (Surplus)/deficit (82) (26)
11.4 Council Tax Council tax derives from charges raised according to the value of residential properties. Each dwelling has been classified into one of nine valuation bands according to its capital value at 1 April 2003 for this specific purpose. Charges are calculated by taking the amount of income required for the Authority, Gwent Police Authority and town and community councils for the forthcoming year and dividing this amount by the council tax base. The council tax base is the total number of properties in each valuation band adjusted by a proportion to convert the number to a Band D equivalent, totalled across all bands and adjusted for discounts. The tax base was 41,627 for 2009/10 (41,606 for 2008/09). This basic amount for a Band D property, £1144.68 in 2009/10 (£1090.95 in 2008/09), is multiplied by the proportion specified for the particular band to give the individual amount due. Council tax bills were based on the following multipliers for bands A to I.
Band A BCDEF GH I Multiplier 6/9 7/9 8/9 1 11/913/9 15/9 18/9 21/9 Chargeable 532 3,034 6,712 8,293 6,729 7,010 4,934 1,663 667 Dwellings Valuation (£000) up to 44 44-65 65-91 91-123 123-162162-223 223-324 324-424 424+
Analysis of the net proceeds from council tax: 2008-09 £000 £000 Council tax collectable (49,183) (46,563) Provision for non-payment of council tax 139 125 (49,044) (46,438)
11.5 General Government Grants The Authority received grants of £74,497,000 in 2009/10 that were identified as not being attributable to specific services within Net Cost of Services (£71,452,000 in 2008/09). The following analysis is provided:
2008-09 £000 £000 Revenue Support Grant (73,638) (70,688) Improvement Agreement Grant (859) (854) (74,497) (71,542)
37 Monmouthshire County Council Annual Accounts 2009-10
11.6 National Non-Domestic Rates (NNDR) NNDR is organised on a national basis. The Welsh Assembly Government specifies an amount for the rate, 48.9p in 2009/10 (46.6p in 2008/09) and, subject to the effects of transitory arrangements, local businesses pay rates calculated by multiplying their rateable value by that amount. The Authority is responsible for collecting rates due from ratepayers in its area but pays the proceeds into the NNDR pool administered by the Welsh Assembly Government. The Welsh Assembly Government redistributes the sums payable to the local authorities on the basis of a fixed amount per head of population. The NNDR income after relief and provisions of £18,450,000 (£19,550,000 for 2008/09) was based on a gross rateable value of £48,350,999 (£48,274,119 for 2008/09). Analysis of the net proceeds from non-domestic rates: 2008-09 £000 £000 Non-domestic rates collectable 18,450 19,550 Cost of collection allowance (158) (157) (Increase)/Decrease in provision for bad debts (59) 30 Payments into national pool 18,233 19,423
Redistribution from national pool (23,744) (23,079)
38 Monmouthshire County Council Annual Accounts 2009-10
FIXED ASSETS AND CAPITAL FINANCING NOTES
11.7 Fixed Assets a) Asset Valuations Assets are valued on the basis recommended by CIPFA and in accordance with the Appraisal and Valuation Standards (6th Edition) issued by the Royal Institution of Chartered Surveyors (RICS). The valuations have been undertaken by the Authority's Estates Section under the supervision of the Head of Asset Management, Mrs D. Hill-Howells MRICS. Refer to note 11.7(g) for further information on the Authority's rolling revaluation programme. The following table summarises the value of the Council’s fixed asset portfolio by asset type as at 31st March 2010:-
Other Land Vehicles, Infra- Community Non- Total & Plant, structure Assets Operational Buildings Furniture & Assets Equipment £000 £000 £000 £000 £000 £000
Certified valuation at 1st April 2009 150,329 2,811 81,138 3,305 27,863 265,446
Additions 14,669 861 5,796 286 3,469 25,081
Disposals 0 0 0 0 (1,865) (1,865)
Reclassifications 1,390 (29) 0 111 (1,472) 0
Impairments (4,426) (128) (5,581) (307) (2,283) (12,725)
Abortive costs 0 0 0 0 (869) (869)
Reversal of past impairment losses 88 0 0 0 78 166
Revaluations 279 3 0 490 3,678 4,450
Reversal of past revaluation gains (438) (19) 0 0 (642) (1,099)
Certified valuation at 31st March 2010 161,891 3,499 81,353 3,885 27,957 278,585
Accumulated depreciation at 1st April (561) (801) (12,672) 0 0 (14,034) 2009
Charge for year (5,094) (302) (1,448) 0 0 (6,844)
Reclassifications 31 29 0 0 (60) 0
Impairments 99 0 0 0 2 101
Abortive costs 0 0 0 0 0 0
Reversal of past impairment losses 0 0 0 0 0 0
Revaluations 34 0 0 0 59 93
Reversal of past revaluation gains 0 0 0 0 0 0 Accumulated depreciation at 31st March 2010 (5,491) (1,074) (14,120) 0 1 (20,684)
Net book value of fixed assets at 1st 149,768 2,010 68,466 3,305 27,863 251,412 April 2009
Net book value of fixed assets at 31st 156,400 2,425 67,233 3,885 27,958 257,901 March 2010
39 Monmouthshire County Council Annual Accounts 2009-10
11.7 Fixed Assets (continued) b) Information on Assets Held Fixed assets owned by the Council as at 31st March 2010 include the following:
31 March 2009 Number Number Schools: Primary 28 29 Comprehensive 4 4 Special 1 1 Nurseries 4 4 Playgroups 1 1 Advertisement Hoardings 2 2 Parks and Open Spaces 325 325 Associations and Clubs 51 51 Recreational Grounds and Picnic Sites 34 36 Libraries 5 5 Historic Sites 10 10 Museums and Theatres 6 6 Leisure Centres 4 4 Youth Centres 2 2 Outdoor Education Centres 2 2 Learning and Resource Centres 1 2 Residential Homes 5 6 Sheltered Housing Units 6 9 Community Centres 9 9 Day Centres 3 3 County Farms 113 117 Industrial Units 30 30 Land Parcels 85 87 Allotments 5 5 Car Parks 41 41 Offices & Depots 62 69 Public Conveniences 29 29 District Shops & Restaurants 30 30 Cemeteries & Crematoria 16 16 Waste Disposal Sites 7 10 Sewerage Treatment Plants 23 23 Markets 2 2 Bus Stations 1 1 Vehicles 86 78 Plant and Machinery 24 19 Infrastructure 2 2 IT Equipment 6 3 Arts and Antiquities 1 1 Surplus Assets held for Disposal 12 14
40 Monmouthshire County Council Annual Accounts 2009-10
11.7 Fixed Assets (continued) c) Non-Operational Assets The Net Book Value of Non-Operational Assets held by the Council as at 31st March 2010, is summarised below:-
31 March 2009 £000 £000 Investment Properties 19,607 19,326 Assets under Construction 4,749 1,805 Surplus Assets held for Disposal 3,602 6,732 27,958 27,863 d) Intangible Fixed Assets The Authority held three intangible fixed assets as at the 31st March 2010. There are no other intangible assets held in the form of purchased software licences or otherwise.
Purchased Software Licences £000 Cost at 1st April 2009 101 Additions 379 Impairments (339) Cost at 31st March 2010 141 Accumulated amortisation at 1st April 2009 (10) Charge for year (10) Accumulated amortisation at 31st March 2010 (20) Net book value at 1st April 2009 91 Net book value at 31st March 2010 121 e) Fully Depreciated Assets The Authority has 1 Plant & Equipment asset and 30 Vehicle assets that are fully depreciated as at 31st March 2010 (20 vehicle assets as at 31st March 2009). f) Changes in Useful Economic Lives Assets revalued during the 2009/10 financial year as part of the Authority's rolling programme for revaluation had their useful economic lives reviewed and subsequently amended where appropriate. No other amendments to useful economic lives were made during 2009/10. During the 2008/09 financial year no useful economic lives of fixed assets were amended. g) Depreciation Methodology Depreciation has been calculated and charged on the following basis for the 2009/10 financial year: • Other land and buildings - on a straight line allocation over the life of the asset. • Vehicles, plant and equipment - on a straight line allocation over the life of the asset. • Infrastructure assets - straight line allocation over 60 years.
41 Monmouthshire County Council Annual Accounts 2009-10
11.7 Fixed Assets (continued) g) Depreciation Methodology (continued) • No depreciation is charged on community assets and non-operational assets. • No depreciation is charged in the year of acquisition. A full year charge is applied in the disposal year. • Individual assets are allocated useful economic lives as determined by the Authority's valuers. h) Valuation of Fixed Assets carried at Current Value The following statement summarises the progress of the Authority's rolling programme for the revaluation of fixed assets: • The last five year rolling programme of fixed asset revaluations concluded at the end of the 2005/06 financial year where the full revaluation exercise was undertaken by the Authority's Estates team in 2004/05 and 2005/06. • The 2009/10 revaluations were all carried out by qualified valuers within the Authority's Estates section. The basis for valuation is set out in the statement of accounting policies. • A rolling programme has however been implemented to ensure that all land and property assets are revalued within the 5 year period to 31st March 2011. • The valuations carried out during 2009/10 primarily included clubs, land parcels, open spaces, car parks and recreational sites.
Valued at Valued at Valued at Valued at Historic Current Historic Current Cost Value Total Cost Value Total 2008/09 2008/09 2008/09 £000 £000 £000 £000 £000 £000 Other Land and Buildings 8,019 153,872 161,891 13,935 136,394 150,329 Vehicles, Plant and Equipment 3,404 95 3,499 2,699 112 2,811 Infrastructure Assets 81,352 1 81,353 81,132 6 81,138 Community Assets 1,349 2,536 3,885 2,698 607 3,305 Non-Operational Assets: Assets under Construction 4,749 0 4,749 1,805 0 1,805 Investment Properties 2,786 16,820 19,606 4,359 14,967 19,326 Surplus Assets held for Disp'l 0 3,602 3,602 338 6,394 6,732 101,659 176,926 278,585 106,966 158,480 265,446 i) Depreciation and Impairment of Fixed Assets Depreciation charges and impairments relating to fixed assets for the financial year are shown below: Dep'n Impair- Total Dep'n Impair- Total Charge for ments Charge for ments the Year the Year 2008/09 2008/09 2008/09 £000 £000 £000 £000 £000 £000 Intangible Fixed Assets 10 339 349 10 128 138 Council Dwellings 0 0 0 0 (6) (6) Other Land and Buildings 5,094 4,677 9,771 5,382 68,778 74,160 Vehicles, Plant and Equipment 302 147 449 319 301 620 Infrastructure Assets 1,448 5,581 7,029 1,444 74 1,518 Community Assets 0 307 307 0 199 199 Non-Operational Assets 0 3,714 3,714 0 6,384 6,384 6,854 14,765 21,619 7,155 75,858 83,013
42 Monmouthshire County Council Annual Accounts 2009-10
11.7 Fixed Assets (continued) i) Depreciation and Impairment of Fixed Assets (continued) The amount charged to the income and expenditure account for the year amounted to £20,520,000 (£82,537,000 in 2008/09), comprising depreciation charges for the year of £6,854,000 (£7,155,000 in 2008/09) and impairments of £13,666,000 (£75,382,000 in 2008/09). £1,099,000 of impairments were taken against the revaluation reserve to reverse past revaluation gains that had arisen (£476,000 in 2008/09). The impairments charged to the income and expenditure account of £13,666,000 comprised: • £10,342,000 of capital expenditure incurred by the Authority has not resulted in an equivalent increase in the value of the fixed assets; • £2,455,000 of impairments arising from revaluations undertaken as part of the Authority's rolling revaluation programme; and • As a result of the withdrawal of the developer on the Abergavenny Regeneration scheme during the financial year, abortive capital costs of £869,000 have been charged against the Authority's revenue account. These are not reversed through the Statement of Movement on the Council Fund Balance. j) Fixed Assets Leased to a Third Party A number of Authority owned premises are not occupied by the Authority but are leased out to a third party for non-authority related use. Existing legal agreements for all properties leased out to third parties are in the form of operational leases. Information on properties leased to third parties as at 31st March 2010 is as follows:
Number of Gross Book Accum Net Book Rentals Leases Value Depn Value Receivable £000 £000 £000 £000 Other Land and Buildings 50 5,160 (149) 5,011 67 Community Assets 19 871 0 871 13 Surplus Assets held for Disposal 19 1,390 0 1,390 75 Investment Properties: County Farms 65 2,891 0 2,891 224 Other Investment Properties 122 11,420 0 11,420 331 Infrastructure 000 00 275 21,732 (149) 21,583 710 k) Finance and Operating Leases Operating Leases The Authority uses vehicles, plant and equipment financed under terms of operating leases. The amount paid under these arrangements in 2009/10 was £1,282,000 in respect of vehicles and £346,000 in respect of plant and equipment. (£1,185,000 and £346,000 in 2008/09). The Authority was commited at 31 March 2010 to making future payments of £4,153,000, comprising:
Equipment Vehicles Total £000 £000 £000 Leases expiring in 2010/11 0 153 153 Leases expiring between 2011/12 to 2015/16 1,040 2,960 4,000 Leases expiring after 2015/16 0 0 0 1,040 3,113 4,153
43 Monmouthshire County Council Annual Accounts 2009-10
11.7 Fixed Assets (continued) k) Finance and Operating Leases (continued) With regard to the Authority acting as a lessor, the Authority sub-lets vehicles to Monmouthshire Housing Association. The gross book value of the vehicles held in the operating lease is £305,000 (£522,000 in 2008/09).
Non-PFI Finance Leases The Authority acquired a number of vehicles under hire purchase agreements during 2005/06, which are accounted for as finance leases. The rentals payable for the year, split between finance charges, charged to the Income and Expenditure Account as Interest Payable and Similar Charges, and principal repayments charged against other long term liabilities being the write down of obligations to the lessor are:
2009-10 2008-09 £000 £000 Interest payable 1 1 Principal repayments 5 9 6 10
The following values of assets are held under finance leases by the Authority, accounted for as part of tangible fixed assets: Vehicles, Plant & Equipment £000 Certified valuation as at 1st April 2009 51 Additions 0 Disposals 0 Certified valuation as at 31st March 2010 51
Accumulated depreciation as at 1st April 2009 (39) Charge for year (12) Disposals 0 Accumulated depreciation as at 31st March 2010 (51) Net book value of fixed assets as at 1st April 2009 12 Net book value of fixed assets as at 31st March 2010 0
There were no outstanding obligations to make payments under these finance leases (excluding finance costs) at 31 March 2010, accounted for as other long-term liabilities.
44 Monmouthshire County Council Annual Accounts 2009-10
11.7 Fixed Assets (continued) k) Finance and Operating Leases (continued) PFI Finance Leases A Section 31 Partnership Agreement exists between Monmouthshire County Council and the Aneurin Bevan Health Board to provide health and social care in the form of inpatient, outpatient, clinic and day care facilities to individuals who have medical, social, community or rehabilitation needs. This agreement came into effect from the 1st June 2006. The Facility is a unique project that replaced a number of outdated or separate facilities scattered throughout the County with a new building that has been financed by a private finance partner over a period of 30 years. The Authority's accounts have been restated during 2009/10 such that the Authority is accounting for its 25% share of the PFI assets, comprising buildings and equipment, with a corresponding liability amounting to its long term obligation for financing these assets. The life of the building had originally been established for valuation purposes as being 40 years and the equipment as being 15 years. The life of the building is 10 years beyond that of the PFI agreement on the basis that it is anticipated that the facility will be used by the parties beyond the 30 years. At the end of the agreement, the buildings revert to the Health Board at nil consideration. The unitary charge for the year, split between service charges charged to Net Cost of Services within the Income and Expenditure Account, finance charges charged to the Income and Expenditure Account as Interest Payable and Similar Charges, and principal repayments charged against other long term liabilities being the write down of obligations are: 2009-10 2008-09 £000 £000 Service charges 91 91 Interest payable 27 28 Principal repayments 25 24 143 143
The following values of PFI assets are held under finance leases by the Authority, accounted for as part of tangible fixed assets: BuildingsEquipment Total £000 £000 £000 Certified valuation as at 1st April 2009 1,354 112 1,466 Revaluations 0 3 3 Reversal of past revaluation gains (136) (20) (156) Certified valuation as at 31st March 2010 1,218 95 1,313
Accumulated depreciation as at 1st April 2009 0 0 0 Charge for year (32) (7) (39) Accumulated depreciation as at 31st March 2010 (32) (7) (39) Net book value of fixed assets as at 1st April 2009 1,354 112 1,466 Net book value of fixed assets as at 31st March 2010 1,186 88 1,274
The fair value of the fixed assets that have brought on to the Authority's balance sheet at the commencement of the scheme was £1,042,000, representing 25% of the capital cost of the facilities of £4,168,000.
45 Monmouthshire County Council Annual Accounts 2009-10
11.7 Fixed Assets (continued) k) Finance and Operating Leases (continued) PFI Finance Leases (continued) A corresponding long-term liability of £1,042,000 was also established at the same time, representing the outstanding commitment due under the terms of the scheme. The outstanding commitment as at the 31st March 2010 was:
2009-10 2008-09 £000 £000 Balance as at 1st April 972 996 Principal repayments (24) (24) Balance as at 31st March 948 972
Outstanding obligations to make future payments under this PFI finance lease at 31 March 2010, accounted for as other long-term liabilities, are as follows:
Service Liability Interest Total Unitary Charge Charge (Principal)
£000 £000 £000 £000
Leases expiring in 2010/11 91 25 27 143 Leases expiring between 2011/12 to 2014/15 365 108 99 572 Leases expiring between 2015/16 to 2019/20 455 154 106 715 Leases expiring between 2020/21 to 2024/25 456 176 83 715 Leases expiring between 2025/26 to 2029/30 456 202 57 715 Leases expiring between 2030/31 to 2034/35 456 232 27 715 Leases expiring between 2035/36 to 2039/40 91 51 1 143
Total liabilities at 31 March 2010 2370 948 400 3718
The base price used to calculate the unitary charge is the 2009/10 unitary charge of £143,000.
46 Monmouthshire County Council Annual Accounts 2009-10
11.7 Fixed Assets (continued) l) Commitments under Capital Contracts Commitments under capital contracts amounted to £3,292,000 at 31st March 2010, comprising the following capital schemes against which the Authority has entered into significant contracts:- Scheme Name £000 Welsh Medium Secondary Education 1,140 Monmouth Shire Hall 1,081 County Hall Replacement 700 Llanfoist Transfer Station 371 3,292
The Welsh Medium Secondary Education scheme include commitments extending to the 2011/12 and 2012/13 financial years. The total commitment in respect of the above for the 2010/11 financial year is £2,422,000. m) Financing Capital Expenditure Total capital expenditure in the year amounted to £28,637,000 (£20,472,000 in 2008/09). The expenditure was financed as follows: Financing£000 Capital Expenditure - Schemes £000 Supported Borrowing 4,775Development schemes over £250,000 8,220 Unsupported Borrowing4,672 Development schemes under £250,000 929 General Capital Grant1,591 Education Strategic Review 7,517 Capital grants and contributions8,955 IT schemes 686 Council Fund Capital Receipts6,587 Maintenance schemes: S106 contributions 351Infrastructure 5,343 Revenue Contribution: Property 2,143 Earmarked Reserves 1,048Housing renovation grants 820 Council Fund 580Section 106 Schemes 367 Insurance Settlements78 Specific grant funded schemes 1,643 Other schemes types 969 28,637 28,637
47 Monmouthshire County Council Annual Accounts 2009-10
11.8 Revenue Expenditure Funded from Capital under Statute Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of fixed assets has been charged as expenditure to the relevant service revenue account in the Income and Expenditure Account in the year. As the Authority has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer to the Capital Adjustment Account then reverses out the amounts charged in the Statement of Movement on the Council Fund Balance so there is no impact on the level of council tax. Revenue expenditure funded from capital under Statute for the year amounted to £3,177,000 and comprised grants for the Community Economic Development Scheme, (CEDS), Renovation Grants provided to homeowners within the community and other Capital Grants and payments. Grant funding applied by the Authority to finance such expenditure amounted to £1,394,000.
CED's Renovation Other Total Grants Grants £000 £000 £000 £000
Capital expenditure incurred during the year 339 820 2,018 3,177 Associated grant financing (44) 0 (1,350) (1,394) 295 820 668 1,783
11.9 Summary of Capital Expenditure treatment In order to assist the user of the accounts, the summary below provides a concise analysis of capital expenditure incurred by the Authority during the financial year and its resultant treatment in the statement of account. Total capital expenditure in the year amounted to £28,637,000 (£20,472,000 in 2008/09). The expenditure was accounted for as follows: 2009-10 2008-09 £000 £000 Tangible fixed asset additions - enhancing value 15,079 13,233 Intangible fixed asset additions - enhancing value 40 0 Tangible fixed asset additions - not enhancing value 10,002 5,870 Intangible fixed Asset additions - not enhancing value 339 128 Revenue Expenditure Funded from Capital under Statute 3,177 1,241 28,637 20,472
Capital expenditure incurred by the Authority that does not result in an equivalent increase in the value of the underlying fixed asset is initially charged in full as a fixed asset addition, and then subsequently impaired in order to ensure that the carrying value of the fixed asset concerned is not overstated.
48 Monmouthshire County Council Annual Accounts 2009-10
11.10 Capital Financing Requirement
The Capital Financing Requirement represents the Authority's underlying need to borrow. The capital financing requirement as at 31st March 2010 was £86,304,000 (£80,958,000 as at 31st March 2009 as restated), an increase of £5,346,000 (an increase of £3,153,000 in 2008/09 as restated). 31 March 31 March 2009 2009 Restated Restated £000 £000 £000 £000
Opening Capital Financing Requirement 80,958 77,805
Capital investment: Intangible assets 379 128 Operational assets 21,612 16,519 Non-operational assets 3,469 2,584 Revenue expenditure funded from capital 3,177 1,241 under Statute 28,637 20,472 Sources of finance: Capital receipts (6,587) (5,708) Government grants and other contributions (10,975) (7,016) Sums set aside from revenue (1,628) (1,554) (19,190) (14,278) Other: Minimum revenue provision (3,232) (3,041) Abortive Capital Costs (869) 0 (4,101) (3,041)
Closing Capital Financing Requirement 86,304 80,958
Explanation of movements in year Increase in underlying need to borrowing - 4,775 4,797 supported by Government financial assistance Increase in underlying need to borrowing - 4,672 1,397 unsupported by Government financial assistance Unsupported borrowing relating to abortive (869) 0 capital costs Less: Minimum revenue provision (3,232) (3,041) Increase in Capital Financing Requirement 5,346 3,153
As a result of fixed assets within the Monnow Vale PFI scheme and associated liability coming on balance sheet, the comparative figures for the financial year ended 31st March 2009 have been restated. Minimum revenue provision for the year ended 31st March 2009 has also been restated accordingly, to ensure that the Authority's policy of prudent provision is maintained,
49 Monmouthshire County Council Annual Accounts 2009-10
11.11 Minimum Revenue Provision The Council is not required to raise council tax to cover depreciation, impairment losses or amortisations. However, it is required to make an annual minimum revenue provision (MRP) from revenue to contribute towards the reduction in its overall borrowing requirement. The Council had previously based the 2008/09 Statutory Council Fund MRP provision on 4% of the opening capital financing requirement. This was in line with previous regulation set out in former regulations 21 and 22 of the Local Authorities (Capital Finance and Accounting) (Wales) Regulations 2003, as amended. This system has now been significantly revised by the Local Authorities (Capital Finance and Accounting) (Wales) (Amendment) Regulations 2008 in conjunction with the publication of adjoining MRP guidance. Amendment regulation 3(1) of the 2008 Regulations revised the former regulation 22. In the new regulation 22, the detailed rules are replaced with a simple duty for an authority each year to make an amount of MRP which it considers to be “prudent”. Council approved an MRP policy in March 2009 applying to the 2009/10 financial year. The policy allows capital expenditure financed via unsupported borrowing to be subject to MRP using the equal annual instalment method, based on the useful life applicable to the nature of the expenditure. The Authority also makes additional voluntary revenue contributions in respect of finance leased assets. As a result of fixed assets within the Monnow Vale PFI scheme and associated liability coming on balance sheet, and to ensure that the Authority's policy of prudent provision is maintained, the minimum revenue provision for the year ended 31st March 2009 has been restated accordingly. The amount of revenue provision made by the Authority in 2009/2010 was £3,232,000 (£3,041,000 in 2008/09).
11.12 Deferred Government Grants and Contributions The balance on this account represents the value of capital grants and contributions which have been applied to finance the acquisition or enhancement of fixed assets, and receipts are that can be matched to expenditure on fixed assets with a finite useful life. The balance is amortised to revenue to offset depreciation charges made for the relevant assets in the Income and Expenditure Account, in line with the depreciation policy applied to them. 31 March 2009 £000 £000 Balance at 1st April 25,563 22,134 Add: Grants applied in year 9,581 6,639 Less: Amortisation to revenue (5,945) (3,210) Balance at 31st March 29,199 25,563
The amortisation to revenue of £6,945,000 (£3,210,000 in 2008/09) comprises in-year amortisation of £1,423,000 (£797,000 in 2008/09) and charges to revenue resulting from asset impairments of £5,522,000 (£2,413,000 in 2008/09).
50 Monmouthshire County Council Annual Accounts 2009-10
FINANCIAL INSTRUMENTS, CURRENT ASSETS & LIABILITIES NOTES
11.13 Financial Instruments Gains and Losses The gains and losses recognised in the Income and Expenditure account in relation to financial instruments are made up as follows: 2008-09 Restated £000 £000 £000 £000
Interest payable on external debt 4,202 4,669 Debt reimbursement from third parties (37) (77) 4,165 4,592
Interest payable to trust funds 47 304 Interest payable on finance leases 28 29 Other interest payable 0 3 75 336 Losses on derecognition 0 0 Gains on derecognition 0 (175) Interest payable and similar charges 4,240 4,753
Interest income (719) (3,397) Interest and investment income (719) (3,397)
Investment Losses (75) 381 Net (gain)/loss for the year 3,446 1,737
Investment Losses - Impairment of Investments Early in October 2008, the Icelandic banks Landsbanki, Kaupthing and Glitnir collapsed and the UK subsidiaries of the banks, Heritable and Kaupthing Singer and Friedlander went into administration. The authority had £1,200,000 deposited with Heritable Bank, with a maturity date and interest rate as follows:
Bank Date Maturity Amount Interest Invested Date Invested Rate
Heritable Bank 23-Jul-08 17-Oct-08 £1,200,000 5.86%
All monies within Heritable Bank are currently subject to the respective administration process. The amounts and timing of payments to depositors such as the authority will be determined by the administrators. The Authority has received the following repayments to date under the administration process:
July 2009 £196,000 December 2009 £154,000 March 2010 £75,000
At the time the Local Authority Accounting Panel (LAAP) Bulletin 82 Update 1 was issued in September 2009, the total amount to be received was estimated to be between 70% and 80% of the claim. The administrators issued the latest creditors report in January 2010. This report noted that current projections suggest a base case return to creditors of 79 to 85 pence in the pound. 51 Monmouthshire County Council Annual Accounts 2009-10
11.13 Financial Instruments (continued) Investment Losses - Impairment of Investments (continued) At the time LAAP Bulletin 82 Update 1 was issued, the first interim payment had been made in July 2009 for 16.13% of the claim. Since then, further dividends have been paid (12.66% in December 2009 and 6.19% in March 2010), bringing the total dividends paid to date to 34.98% of the claim. In view of this information, LAAP recommends that the repayment schedule shown below is used to estimate the recoverable amount at 31 March 2010. The schedule is based on expected total dividends of 84.98% of the claim.
June 2010 5% September 2010 5% December 2010 5% March 2011 5% June 2011 5% September 2011 5% December 2011 5% March 2012 5% June 2012 5% September 2012 5%
This estimate is at the top end of the range quoted by the administrators. This is in line with the approach taken in LAAP Bulletin 82 update 2 issued in May 2010, where it was noted that a strategy of winding up the bank by 2012 was expected to produce a return at the top end of the range. A strategy of winding up the bank before 2012 would lead to lower returns. On this basis, the Local Authority Accounting Panel considers that a recovery at the top end of the estimate is the most likely outcome, and this therefore forms its best estimate. Based on the latest information available the authority has made an impairment adjustment for the deposit. As the available information is not definitive as to the amount and timing of payments to be made by the administrators, it is likely that further adjustments will be made to the accounts in future years. Based on current information, the impairment recognised as at the 31st March 2010 was £305,000 (£380,000 as at 31st March 2010), with an impairment loss adjustment of £75,000 has been credited to the Income and Expenditure Account in 2009/10. The carrying amount of the investment as at 31st March 2010 was £561,000 (£1,248,000 as at 31st March 2009). Interest credited to the Income and Expenditure Account in 2009/10 in respect of the Heritable investment amounts to £42,000.
Financial Instruments Balances The borrowing and investments disclosed in the balance sheet of the Authority as at 31st March 2010 are made up of the following categories of financial instruments: Long-Term Current 31 March 31 March 2009 2009 £000 £000 £000 £000 Financial liabilities at amortised cost 78,292 72,465 1,028 897 Total borrowings 78,292 72,465 1,028 897 Loans and receivables 346 0 36,321 38,876 Total investments 346 0 36,321 38,876
52 Monmouthshire County Council Annual Accounts 2009-10
11.13 Financial Instruments (continued)
Financial Instruments Balances (continued) Financial liabilities and financial assets represented by loans and receivables are carried in the balance sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that will take place over the remaining term of the instruments, using the following assumptions: • Interest is calculated using the most common market convention, ACT/365 • Where interest is paid/received every 6 months on a day basis, the value of interest is rounded to 2 equal instalments • For fixed term deposits it is assumed that interest is received on maturity, or annually if duration is greated than 1 year • The interest value and date have not been adjusted where a relevant date occurs on a non working day • Fair value calculations are based on the comparable new borrowing/deposit rate for the same financial instrument from a comparable lender. A consistent approach has been applied to assets and liabilities. The fair values calculated are as follows: Carrying Carrying Fair Fair Amount Amount Value Value 31 March 31 March 2009 2009 £000 £000 £000 £000 Financial liabilities 79,320 73,362 87,560 84,140
The fair value is more than the carrying amount because the authority’s portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the discount rate (underlying market rates) at the Balance Sheet date. This commitment to pay interest above current market rates increases the amount that the authority would have to pay if the lender requested or agreed to early repayment of the loans.
Carrying Carrying Fair Fair Amount Amount Value Value 31 March 31 March 2009 2009 £000 £000 £000 £000 Loans and receivables 36,667 38,876 36,651 38,095
The carrying amount is higher than the fair value because the authority’s portfolio of investments includes a number of fixed term deposits where the interest rate receivable is higher than the rates available for similar investments at the Balance Sheet date. This guarantee to receive interest above current market rates increases the amount that the authority would receive if it agreed to realise the investments. The carrying amount of loans and receivables also includes the impairment of the investment in Heritable Bank.
Management of Financial Risk The Authority's activities expose it to a variety of financial risks: • Credit risk – the possibility that other parties might fail to pay amounts due to the authority • Liquidity risk – the possibility that the authority might not have funds available to meet its commitments to make payments • Market risk – the possibility that financial loss might arise for the authority as a result of changes in such measures as interest rates and stock market movements
53 Monmouthshire County Council Annual Accounts 2009-10
11.13 Financial Instruments Balances (continued) Management of Financial Risk (continued) The Authority’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the resources available to fund services. Risk management is carried out by a central treasury team in conjunction with appointed treasury advisors, under policies approved by Authority in the Treasury Management Strategy and Annual Investment Strategy. The strategy provides written principles for overall risk management, as well as written policies covering specific areas, such as interest rate risk, credit risk, and the investment of surplus cash. The revised Borrowing Strategy took into account the fact that it was cheaper to borrow for shorter periods than for long periods as previously was the case. The revised Investment strategy sought to minimise risk in the current climate by restricting investment to UK institutions given a first class credit rating by external rating agencies and as advised by leading financial consultants and by ensuring liquidity is maintained with short term deposits. The Authority has adopted CIPFA's Treasury Management in the Public Services: Code of Practice and has set treasury management indicators to control key financial instrument risks in accordance with CIPFA's Prudential Code. a) Credit Risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the authority’s customers. Deposits are not made with banks and financial institutions if they fall below the minimum "high" credit criteria set by the Authority. Different counterparty limits are in place for different investment instruments, based on type or country of origin. The Authority currently has exposure to credit risk on the investment of £1.2m held with Heritable bank which is currently in administration, and for which the Authority has recognised an impairment of £305,000 (£380,000 as at 31st March 2009). The Authority does not consider it to have any current exposure to credit risk on any other investments held, based on experience of default and uncollectability over the last five financial years and taking into account current market conditions. The Authority held investments in institutions in the following countries at 31st March 2010: 31 March 2009 £000 £000 United Kingdom 36,106 38,007 Ireland 0 0 Iceland 561 869 36,667 38,876
Customers are assessed, taking into account their financial position, past experience and other factors such as the current economic climate. Risk of default and uncollectability is assessed based on the nature of the underlying debt and historic collection rates. Bad debt provisions in place at the year-end are illustrated in note 11.16 to the accounts. b) Liquidity Risk As the authority has ready access to borrowings from the Public Works Loans Board, there is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. Instead, the risk is that the authority will be bound to replenish a significant proportion of its borrowings at a time of unfavourable interest rates.
54 Monmouthshire County Council Annual Accounts 2009-10
11.13 Financial Instruments Balances (continued) Management of Financial Risk (continued) The strategy is to ensure that loans do not mature at an unopportune time and this is mitigated through a combination of careful planning of new loans taken out and (where it is economic to do so) making early repayments. The maturity and counterparty analysis of financial liabilities is as follows: 31 March 2009 £000 £000 Public Works Loan Board 65,064 59,045 Market Loans 13,819 13,818 Other local authorities 437 499 79,320 73,362 The Loans Mature as follows:- Less than one year 1,028 897 Between one and two years 5,115 0 Between two and five years 5,004 6,721 Between five and ten years 10,544 6,383 More than ten years 57,629 59,361 79,320 73,362 c) Market Risk i) Interest rate risk The Authority is exposed to significant risk in terms of its exposure to interest rate movements on its borrowings and investments. Movements in interest rates have a complex impact on the Authority. For instance, a rise in interest rates would have the following effects: • Borrowings at variable rates – the interest expense charged to the Income and Expenditure Account will rise • Borrowings at fixed rates – the fair value of the liabilities borrowings will fall • Investments at variable rates – the interest income credited to the Income and Expenditure Account will rise • Investments at fixed rates – the fair value of the assets will fall The Authority did not hold any loans or receivables during or at the end of the financial year that were considered to be at variable rates. Borrowings are not carried at fair value, so nominal gains and losses on fixed rate borrowings would not impact on the Income and Expenditure Account or STRGL. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Income and Expenditure Account and affect the Council Fund Balance £ for £. Movements in the fair value of fixed rate investments will be reflected in the STRGL. The Authority has a number of strategies for managing interest rate risk. Policy is to aim to keep a maximum of 35% of its borrowings in variable rate loans. During periods of falling interest rates, and where economic circumstances make it favourable, fixed rate loans will be repaid early to limit exposure to losses. The risk of loss is ameliorated by the fact that a proportion of government grant payable on financing costs will normally move with prevailing interest rates or the authority’s cost of borrowing and provide compensation for a proportion of any higher costs. The treasury management team has an active strategy for assessing interest rate exposure that feeds into the setting of the annual budget. In-year analysis allows any adverse changes to be accommodated. The analysis will also advise whether new borrowing taken out is fixed or variable.
55 Monmouthshire County Council Annual Accounts 2009-10
11.13 Financial Instruments Balances (continued) Management of Financial Risk (continued) At 31 March 2010, if interest rates had been 1% higher with all other variables held constant, the financial effect would be: • Financial Liabilities - a reduction in fair value of £9,390,000 (£9,659,000 reduction in 2008/09). • Financial Assets - a reduction in fair value of £9,000 (£253,000 reduction in 2008/09) on loans and receivables The impact of a 1% fall in interest rates would be as above but with the movements being reversed. ii) Price risk The Authority does not hold any equity shares or shareholdings. iii) Foreign exchange risk The Authority has no financial assets or liabilities denominated in foreign currencies and thus has no exposure to loss arising from movements in exchange rates.
11.14 Long Term Debtors The nature and value of payments due to the Council for the year but not received as at 31st March 2010, repayable in excess of 12 months of the balance sheet date, is summarised below:- 31 March 2009 £000 £000 Former Gwent County Council loan debt 337 372 Mortgage advances 255 285 Car loans 250 235 Transferred services loan debt 137 157 Other long term debtors 19 25 998 1,074
Accounting requirements require financial instruments in the form of loans and receivables to be carried at amortised cost. However, the long term debtors in respect of loan debt and mortgage advances are deemed to be outside the scope of the accounting provisions as they are statutory debts and do not arise from contracts. Long term debtors in respect of car loans and an interest free loan residing within other long-term debtors have also not been carried at amortised cost on the grounds that the figures quoted are not materially different.
11.15 Stocks and Work in Progress The value of stocks and work in progress as at 31st March 2010 is summarised below: 31 March 2009 £000 £000 Stores & stocks:- - Central stores 173 144 - Other stores 126 132 Work in progress 0 0 299 276
56 Monmouthshire County Council Annual Accounts 2009-10
11.16 Debtors The nature and value of payments due to the Council for the year but not received as at 31st March 2010, repayable within 12 months of the balance sheet date, is summarised below:- Gross Bad Debt Net 31 March Debtors Provision Debtors 2009 £000 £000 £000 £000 Restated Revenue debtors 6,022 (133) 5,889 5,949 Capital debtors 3,722 0 3,722 1,168 Corporate sundry debtors 7,454 (1,549) 5,905 6,461 Social Services sundry debtors 977 (227) 750 715 Customs and excise 1,176 0 1,176 580 Council tax arrears 3,652 (1,266) 2,386 2,220 NNDR debtor 3,532 0 3,532 1,970 Housing Revenue Account Subsidy 0 0 0 436 Council Tax and Housing Benefit Subsidy 942 0 942 484 Rent arrears 441 (420) 21 32 Housing Benefit Overpayments 842 (287) 555 402 28,760 (3,882) 24,878 20,417
11.17 Creditors The nature and value of payments due to be made by the Council in the year but not actually made as at 31st March 2010 is summarised below: - 31 March 2009 £000 £000 Restated Revenue Creditors 13,624 12,372 Capital Creditors 1,270 1,600 Unapplied Capital Grants and Contributions 2,189 1,697 Commuted Maintenance Sums 2,233 2,207 Sundry Creditors 548 862 Payroll Creditors 3,763 3,854 Prepaid Council Tax 559 702 24,186 23,294
11.18 Provisions and Contingent Liabilities The value of provisions as at 31st March 2010, together with their movement for the year, is summarised below: As at As at 1 April Increase/ Payments 31 March 2009 (Decrease) in Year 2010 Note £000 £000 £000 £000
Insurance Claims 11.18a 1,249 (353) (397) 499 Single Status and Equal Pay 11.18c 0 5,542 0 5,542 Greater Gwent CSO dissolution 11.18d 136 2 0 138 Drybridge Gardens 11.18e 282 29 (57) 254 1,667 5,220 (454) 6,433
57 Monmouthshire County Council Annual Accounts 2009-10
11.18 Provisions and Contingent Liabilities (continued) a) Insurance Claims The Authority maintains insurance policies to cover itself against claims made. The effect of these policies is to limit the Council’s costs in relation to successful claims made against it. Annual insurance premiums have been recharged to services during the financial year, and costs of claims incurred are charged to revenue when the claim is settled, which may be in a financial year subsequent to when the claim was submitted. To satisfy FRS12 Provisions, Contingent Liabilities and Contingent Assets, a full actuarial assessment of open insurance claims was carried out at 31st March 2009 by the Authority's insurance brokers. This assessment has been updated by the Authority to reflect the estimated cost of liabilities at 31 March 2010. At 31st March 2009, the authority made provision in full for all open claims irrespective of the likelihood of a successful claim. This method has been revised for 31st March 2010. A provision has only been made where the likelihood of success has been deemed as exceeding 50%. The result is that the total provision is at the most likely level to be paid out in the future and results in a reduction in the required provision during the 2009/10 financial year. The reduction in provision has been used to replenish the Authority's insurance and risk management earmarked revenue reserve so that it is sufficient to cover potential costs of claims which are not sufficiently probable to merit a provision. The movement in provision has been charged against the services to which the claims relate. The Authority maintains the insurance and risk management reserve to assist in the control of the Authority’s insurance risks. The balance in the reserve is reviewed annually as part of the assessment on the adequacy of reserves by the Corporate Director - Regeneration, Environment and Resources. The reserve is required to cover potential claims not yet received but relating to the financial year 2009/10 as well as recorded claims, which do not merit a provision, referred to above. It therefore represents additional cover, over and above the provision, to cover all foreseeable claims. The provision in place at 31st March 2010 was £499,000 (£1,249,000 at 31st March 2009) and the balance on the insurance and risk management reserve as at 31st March 2010 was £1,270,000 (£663,000 as at 31st March 2009). These balances are deemed to provide sufficient cover for the Authority's claims exposure. The Authority's insurance brokers have stated that, based on recent data, the majority of these costs are likely to materialise over the next three financial years. A breakdown of the provision made across policy types is provided below: 2009/10 2008/09 £000 £000 Policy Type Public Liability 359 890 Employer's Liability 128 345 Property 12 14 Total 499 1,249
The total number of open claims made against the Authority as at 31st March 2010 was 152 (219 open claims as at 31st March 2009). b) Municipal Mutual Insurance For the policy years before 1992/93, the local authority is exposed to a potential insurance liability relating to the closure of Municipal Mutual Insurance (MMI) on 30th September 1992. If in future, MMI has insufficient funds to meet future claims then the MMI Scheme of Arrangement will be triggered. The liquidators would then be able to recover a levy based on the total value of claim payments less £50,000 from each scheme member. In addition, a percentage payment would be applied to future claims payments. The total value of claim payments and estimated outstanding claims as at 31st March 2010 for Monmouth Borough Council and the Authority's share of the former Gwent County Council amount to £348,000 and £880,000. Advice received suggests a potential exposure of 2-10% based on the current financial position of MMI, equating to a range of exposure of between £24,000 and £117,000 As MMI continues to pay agreed claims in full and expects to pay all its liabilities in full, no provision is being made in the accounts.
58 Monmouthshire County Council Annual Accounts 2009-10
11.18 Provisions and Contingent Liabilities (continued) c) Single Status and Equal Pay The Authority, along with others nationally, is facing a financial risk in relation to the settlement of potential claims for back pay under Equal Pay legislation. The issue has become more significant as the implementation date for Single Status (the national initiative to ensure common terms and conditions and pay for all staff in Local Government) draws nearer for the Authority. Two issues impact on the financial statements, namely the ongoing additional cost and the potential back pay. The Authority has approved the draft Single Status Collective Agreement in September 2010, confirming an implementation date of 1st April 2009. The additional pay related costs of implementation for 2009/10 are estimated at £2,582,000. Provision has consequently been made in the accounts for 2009/10. The Authority will subsequently be undertaking a sensitivity analysis to establish the vulnerability of the Authority to equal pay claims arising from the implementation of single status. In respect of potential claims for back pay and at the time the Statement of Accounts was authorised for issue, the Authority had received 461 equal pay grievances (332 grievances as at 31st March 2009). No claims have currently been settled by the Authority and external legal advice continues to be taken to determine where defence in mitigation of payment exists. The timing of settlement of these claims remains unclear. In respect of potential claims for back pay the Authority has estimated the financial impact of a possible economic settlement arising from claims currently received or due to be received under Equal Pay legislation as being £2,960,000. As a consequence a provision for potential future liabilities has been made in the accounts for 2009/10. In 2008/09, the defence had at that time been viewed as strong, and as a consequence no provision had been made in the accounts. For 2009/10 the legal position continues to develop with case law resulting in the Authority considering entering into negotiation on a settlement based on economic grounds. d) Greater Gwent Central Supplies Organisation dissolution The trading activities of the Greater Gwent Central Supplies Organisation (CSO), a joint arrangement entered into by Newport City Council, Torfaen County Borough Council, Caerphilly County Borough Council and Monmouthshire County Council, was wound up on 1st April 2006. The lead authority is Torfaen County Borough Council. The cost to the member authorities of winding up the CSO had originally been estimated as £1,600,000 (gross) or £1,100,000 (net of retrospective payments by suppliers). Monmouthshire is liable for approximately 22% of any costs resulting. As at 31st March 2010, £286,710 had been paid by the Authority. No payments have been made during the financial year. A provision is in place of £99,000 (£97,000 in 2008/09) that represents residual cost estimates, which principally concern the recovery of retrospective discount income, the collection of which is now thought to be unlikely. The Authority had also been informed of risks concerning the recoverability of an element of the remaining outstanding debtors of the CSO which still remain and for which the Authority has a further provision of £39,000 in place, representing its share of the potential costs. Torfaen County Borough Council have indicated that final settlement at this slightly increased level will occur early in the 2010/11 financial year.
59 Monmouthshire County Council Annual Accounts 2009-10
11.18 Provisions and Contingent Liabilities (continued) e) Drybridge Gardens Income generated by the Authority on providing Social Services provision at Drybridge Gardens to neighbouring authorities is currently being disputed under the Ordinary Residency rule. The Welsh Assembly Government have made a judgement on one case ruling that the client had been an ordinary resident in Monmouthshire since the move to Drybridge Gardens. Consequently all monies paid over to the Authority will have to be refunded and the outstanding debts written off. Although the timing for full resolution of this matter still remains indeterminable it is now almost certain that the three remaining cases will result in the same outcome. In light of the first decision, it is considered prudent to provide for the potential loss of this income. At the 31st March 2010, debtors of £465,000 are present against which full bad debt provision has been made. Further to this, debtors of £254,000 had been paid prior to the year-end (£281,000 as at 31st March 2009), for which provision in the accounts has been made for 2009/10, as a result of amounts being potentially having to be reimbursed. f) Monmouthshire Further Education Trust Fund The Authority identified during 2007/08 that it had been in occupation of properties owned by the Monmouthshire Further Education Trust Fund, and more specifically the Usk Grammar School Foundation, for which no rentals had been charged against the Authority. The Authority had been the sole and corporate Trustee for the Trust Fund up until 31st March 2010. The properties concerned are defined as being income- generating properties of the Trust. Independent legal advice had been sought and the Charity Commission had provided initial advice and recommendations. As a result of agreement made with the Charity Commission, the Authority made payment to the Trust Fund during the financial year of £165,000. This payment concerned the retrospective charge that fell on the Authority in terms of rentals not charged. g) Asbestos Indemnity As part of the process of transferring the Authority's council housing stock in 2007/08, Council approved changes to the Stock Transfer Agreement to include an asbestos indemnity. It was a standard requirement of stock transfers that the local authority provides an indemnity to the funders and new landlord, in this case Monmouthshire Housing Association, with respect to the presence of asbestos in the property transferring. The indemnity does not apply in respect of the first £2.32million of costs incurred in relation to such works, as updated annually by RPI. The resultant liability is one where the authority has negotiated a limited contingent liability of £5.26million, as updated annually by RPI, for a period of 15 years from the date of transfer of 20th January 2008. 13 years remain of this period. There are no immediate financial implications and professional advice suggests a low risk of future liability arising. Low risk does not however equate to “no risk” and there is a potential future liability of up to £5.26million, as updated annually by RPI, in the event the asbestos indemnity is called upon. The current spend to date by Monmouthsire Housing Association (for the period 21st January 2008 to 31st March 2009) is £9,000. h) Judicial Review of Planning Decisions As a result of planning decisions taken by the Authority, the Authority has been served by an application for judicial review by the claimant. The planning decision concerns Replacement Cattle Market at Raglan. The application was served in early September 2009. The High Court will need to determine whether leave is granted to move to Judicial Review, the next stage being a substantive hearing. The Authority is currently estimating a likely cost of £10,000 to £15,000 in this case. If the original planning decision is successfully contested and quashed by the High Court the authority would be liable for all legal costs incurred, both by itself and the respective claimant. No provision has been made for the year ended 31st March 2010.
60 Monmouthshire County Council Annual Accounts 2009-10
RESERVES NOTES
11.19 Movement on Reserves
The Authority keeps a number of reserves in the Balance Sheet. Some are required to be held for statutory reasons, some are needed to comply with proper accounting practice, and others have been set up voluntarily to earmark resources for future spending plans. An analysis of the movement in reserves during the financial year is illustrated below: Balance at Gain/ (Loss) Transfer Balance at Note 1 April 2009 to Reserve to/(from) 31 March in Year Reserves in 2010 Year £000 £000 £000 £000 Revaluation Reserve 17,728 3,443 (1,631) 19,540 11.29 Capital Adjustment Account 127,255 - (4,277) 122,978 11.24 Financial Instruments Adjustment Account (556) - (6) (562) 11.30 Useable Capital Receipts Reserve 12,371 - (4,197) 8,174 11.26 Deferred Capital Receipts 73 - (31) 42 11.27 Pensions Reserve (103,791) (32,045) (2,583) (138,419) 11.23 Council Fund balance 6,638 (15,671) 15,367 6,334 11.23 Housing Revenue Account balance 3,353 - 1 3,354 11.23 Earmarked reserves 15,196 - (2,643) 12,553 11.21 78,267 (44,273) 0 33,994
The purpose of each reserve or account is shown below to for reference: Reserve Purpose • Revaluation Reserve Store of gains on revaluation of fixed assets not yet realised through sales • Capital Adjustment Account Store of capital resources set aside to meet past expenditure • Financial Instruments Balancing account to allow for differences in statutory Adjustment Account requirements and proper accounting practices for borrowings and investments • Useable Capital Receipts Proceeds of fixed asset sales available to meet future capital Reserve investment • Deferred Capital Receipts Amounts derived from the sale of fixed assets, the receipt of which is deferred into future accounting periods • Pensions Reserve Balancing account to allow inclusion of Pensions Liability in the Balance Sheet • Council Fund Resources available to meet future running costs for non-housing services • Earmarked Reserves Resources earmarked for specific purpose or application and available to meet future running costs • Housing Revenue Account Resources available to meet future running costs for council houses, the balance of which will revert to the Council Fund upon statutory close of the account
61 Monmouthshire County Council Annual Accounts 2009-10
11.20 Financial Reserves The in year movements in the Authority financial reserves is summarised below: At 1 April In Year At 31 March 2009 Movement 2010 £000 £000 £000 Amount of Council Fund Balance held by Schools under 1,571 (287) 1,284 Local Management Schemes Amount of Council Fund Balance generally available for new 5,066 (17) 5,050 expenditure Total Council Fund Balance 6,638 (304) 6,334 Earmarked Revenue Reserves 15,196 (2,643) 12,553 Housing Revenue Account 3,353 1 3,354 25,187 (2,946) 22,241
11.21 Earmarked Reserves Description At 1 April Contribution Contribution 31 March 2009 to Reserves from 2010 Reserves £000 £000 £000 £000 Single Status and Equal Pay Reserve 4,730 3,659 (6,924) 1,465 Invest to save reserve 1,972 157 (98) 2,031 Change management reserve 1,136 1,891 (697) 2,330 Insurance and risk management reserve 663 750 (143) 1,270 I.T. reserve 1,133 520 (435) 1,218 Capital support reserve 980 0 (84) 896 Treasury equalisation reserve 967 117 (447) 637 Superannuation reserve 529 250 (247) 532 Fixed Asset Disposal Costs Reserve 580 0 (281) 299 Agile Working Transition Reserve 190 150 (150) 190 Direct Services Support Reserve 272 0 (208) 64 MICAS Implementation Reserve 170 0 (170) 0 Highways & Waste Management Reserve 608 0 (227) 381 Property Reserve 146 0 0 146 Grass Routes to Schools Reserve 80 65 0 145 Landscape Reserve 176 0 (76) 100 Transport Reserve 125 0 (89) 36 Facilities Reserve 165 0 (155) 10 Museums Reserve 114 0 0 114 Service Reserves 1,414 65 (547) 932 Other reserves 156 70 (49) 177 Trading Accounts: Youth Offending Team trading reserve 97 144 0 241 Outdoor education centres trading reserve 50 90 0 140 School library service trading reserve 96 31 0 127 Building Control trading reserve 61 15 (72) 4 15,196 7,909 (10,552) 12,553
62 Monmouthshire County Council Annual Accounts 2009-10
11.21 Earmarked Reserves (continued) a) Analysis of Earmarked Reserves (continued) Earmarked reserves have been set up where there has been a need to set aside resources for a specific future purpose. The purpose of each earmarked reserve is detailed below. Utilisation of these reserves is under the control of the Cabinet and has been approved by it.
• Invest to Save Reserve To finance abnormal items of expenditure either of a revenue or capital nature with the expectation of repayments to replenish the reserve being made via service revenue accounts in subsequent years. • I.T. Reserve To provide for known future costs, whether they be revenue or capital in nature. • Capital Support Reserve Created to accumulate contributions from revenue to finance future capital expenditure. • Change Management Reserve To meet costs arising from discontinued services, and to finance costs unrepresentative of the cost of normal service delivery. • Superannuation Reserve To provide for the need to make commuted payments for early retirements and redundancies over a maximum period of five years but a recommended period of three years due to the low funding level of the Greater Gwent (Torfaen) Scheme. • Insurance and Risk Management Reserve To assist in the management of the Council's insurance risks. To meet excesses and administration costs on claims against the Council, to provide cover on self-insured risks and contribute to risk management initiatives. • Treasury Equalisation Reserve Originally created from rescheduling discounts and premia, intended for use under the concept of prudence to permit a long term view to be taken of treasury decisions. • Fixed Asset Disposal Costs Reserve Securing capital receipts is a vital element of the Authority's capital investment strategy. Improving the final disposal value by investment, either in the fabric of the asset or by proper disposal expertise ensures the Council obtains the best possible value for surplus assets. Current accounting regulations are such that investing in disposal must be taken against the revenue account and these costs cannot be fuly offset against the ultimate capital receipt. The reserve has been established to finance such expenditure. • Single Status & Equal Pay Reserve The implementation of single status job evaluation in 2007 is a mandatory requirement arising from the 2005 National pay settlement. Experience of implementation elsewhere suggests that the overall pay bill will increase and it has been considered prudent to hold an amount against setup costs and the expectation of an increased pay bill. The intended scope of the reserve has been extended to cover any potential future costs arising from claims received under Equal Pay legislation, for which provision has not currently been made. • Direct Services Support Reserve Funded from service under spends in 2007/08. The remaining balance is to be fully applied in 2010/11 for one-off tangible service improvements. • Agile Working Transition Reserve To assist in a move towards an agile working environrment as part of the Authority's future accomodation strategy.
63 Monmouthshire County Council Annual Accounts 2009-10
11.21 Earmarked Reserves (continued) a) Analysis of Earmarked Reserves (continued) • Service Reserves Created from surpluses and deficits on the Authority's external and internal trading account activities, and maintained to support and develop these services. • Other Reserves These include a number of other reserves where separate classification is not deemed necessary due to the level of the reserve balance or its nature. • Trading Reserves Trading reserves at the year-end now represent balances created as a result of external trade or where the Authority assumes lead authority status for administering funds on behalf of other partner organisations.
11.22 School Balances The balance on the Council Fund includes £1,109,000 in respect of underspent (or overspent) budgets which have been delegated to schools. These balances are at the disposal of the schools and represent an earmarked reserve which is not available for the Authority to use generally. Details of the movements of these reserves are shown below:
At 1 April In Year At 31 March School Name 2009 Movement 2010 £££ Comprehensives Caldicot (43,438) 41,926 (1,512) Chepstow 262,868 (108,766) 154,102 King Henry VIII 193,316 (100,684) 92,632 Monmouth (31,767) 18,366 (13,401)
Sub Total 380,979 (149,158) 231,821
Primaries Archbishop R Williams 38,478 15,477 53,955 Caldicot Green Lane 86,566 17,076 103,642 Caldicot West End 99,550 53,163 152,713 Cantref 52,194 5,702 57,896 Castle Park 9,581 (26,834) (17,253) Cross Ash 65,595 (18,053) 47,542 Deri View 56,313 (73,318) (17,005) Durand 38,005 3,288 41,293 Gilwern 56,529 12,963 69,492 Govilon 20,970 (15,630) 5,340 Goytre Fawr 37,828 17,918 55,746 Kymin View 121,882 (20,715) 101,167 Llandogo 27,169 (27,039) 130 Llanfair Kilgeddin CV 32,962 33,948 66,910 Llanfoist 1,484 (42,723) (41,239) Llanover 54,227 (32,852) 21,375 Llantilio Pertholey 24,969 45,957 70,926 Llanvihangel Crucorney (6,361) (25,554) (31,915) Magor Vol Aided (12,909) (33,353) (46,262) New Pembroke Primary 22,315 (43,828) (21,513)
64 Monmouthshire County Council Annual Accounts 2009-10
11.22 School Balances (continued)
At 1 April In Year At 31 March School Name 2009 Movement 2010 £££ Primaries (continued) Osbaston Church in Wales 27,644 17,396 45,040 Our Lady's & St Michael's Catholic Primary (82,976) 77,508 (5,468) Overmonnow 46,284 (62) 46,222 Raglan 38,279 (12,504) 25,775 Rogiet 74,063 (14,043) 60,020 Shirenewton 45,472 (7,296) 38,176 St Mary's (Chepstow) 27,061 (4,024) 23,037 The Dell 8,150 56,444 64,594 Thornwell 7,610 (4,876) 2,734 Trellech 26,235 5,676 31,911 Undy 24,806 23,416 48,222 Usk CV (35,014) 23,701 (11,313) Ysgol Gymraeg Y Fenni 39,193 (11,260) 27,933 Ysgol Gymraeg Ffin 25,892 (24,144) 1,748 Sub Total 1,100,046 (28,475) 1,071,571 Special Mounton House 90,219 (109,452) (19,233) TOTAL 1,571,244 (287,085) 1,284,159
11.23 Movement in revenue resources
The movement in revenue resources of the Authority is outlined below, reflecting any surpluses or deficits made by each reserve during the year, in addition to the appropriation of funds to and from earmarked reserves and actuarial gains and losses on the pension reserve.
Council Fund HRA Balance Earmarked Pensions Balance Revenue Reserve Reserves £000 £000 £000 £000 Balance as at 1 April 2009 6,638 3,353 15,196 (103,791) Surplus/(deficit) for 2009/10 (15,671) - - - Appropriations (to)/from other 15,368 1 (2,643) (2,583) reserves Actuarial gains and losses relating to - - - (32,045) pensions Balance as at 31 March 2010 6,334 3,354 12,553 (138,419)
65 Monmouthshire County Council Annual Accounts 2009-10
11.24 Capital Adjustment Account The Capital Adjustment Account contains the amounts which are required by statute to be set aside from capital receipts for the repayment of external loans, and the amount of revenue used to finance capital expenditure. The balance on the reserve is reduced as provision is made for repayment of loan debt. The in year movements on the account are summarised below:- 31 March 2009 £000 £000 Restated Balance as at 1st April 127,255 197,322 Useable capital receipts used 6,587 5,709 Direct revenue financing 1,629 1,554 Grants, contributions and other financing 5,945 3,210 Minimum Revenue Provision (less depreciation) (3,305) (4,158) Revenue Expenditure Funded from Capital under Statute (1,783) (864) Impairment losses (12,799) (75,382) Disposal of fixed assets (551) (136) Balance as at 31st March 122,978 127,255
As a result of fixed assets within the Monnow Vale PFI scheme and associated liability coming on balance sheet, the comparative figures for the financial year ended 31st March 2009 have been restated.
11.25 Movements in amounts set aside to finance capital investment These entries recognise the extent to which capital receipts, grants, contributions and revenue contributions to loan repayments have been set aside in the year. This provides a measure of the degree to which the value of the fixed asset balance can be regarded as a gain over and above historical cost. Capital Government Total adjustment grants account deferred £000 £000 £000 Capital receipts set aside in 2009/10: - reserved receipts 0 - 0 - useable receipts applied 6,587 - 6,587 Total capital receipts set aside 6,587 - 6,587 Revenue resources set aside in 2009/10: - capital expenditure financed from revenue 1,629 - 1,629 - reconciling amount for provision for loan repayment (3,305) - (3,305) Total revenue resources set aside (1,676) - (1,676) Capital expenditure charged in 2009/10 (15,133) - (15,133) Grants applied to capital investment - 9,581 9,581 Amount credited to capital adjustment account 5,945 (5,945) 0 Total increase/(decrease) in amounts set aside to (4,277) 3,636 (641) finance capital investment in 2009/10 Total movement on reserve in 2009/10 (4,277) 3,636 Balance brought forward at 1 April 2009 127,255 25,563 Balance carried forward at 31 March 2010 122,978 29,199
66 Monmouthshire County Council Annual Accounts 2009-10
11.26 Useable Capital Receipts Reserve Amounts in excess of £10,000 are categorised as capital receipts. The balance of receipts is required to be credited to the Useable Capital Receipts Reserve, and can then only be used for new capital investment or set aside to reduce the Council’s borrowing requirement. Receipts are appropriated to the reserve from the Statement of Movement on the Council Fund Balance. The in-year movements on this reserve are summarised below: - 31 March 2009 £000 £000 Balance as at 1st April 12,371 16,208 Capital receipts 2,390 1,872 Less: capital receipts set aside 0 0 Less: capital receipts used for financing (6,587) (5,709) Balance as at 31st March 8,174 12,371
11.27 Deferred Capital Receipts Deferred capital receipts represent amounts derived from the sale of assets which will be received in instalments over agreed periods of time. They arise principally from mortgages on sales of council houses, which form the main element of mortgages under long term debtors.
11.28 Movement in realised capital resources This represents the increase or decrease in the Authority’s ability to finance capital investment in future years, largely through capital receipts received from the disposal of fixed assets. The division of these receipts between the capital adjustment account (reserved receipts) and useable capital receipts reserve is based upon the statutory requirements. Useable Unapplied capital capital grants receipts and contributions £000 £000 Amounts receivable in 2009/10 2,390 1,149 Amounts applied to finance new capital (6,587) (657) Total increase/(decrease) in realised capital resources (4,197) 492 Balance as at 1 April 2009 12,371 1,697 Balance as at 31 March 2010 8,174 2,189
67 Monmouthshire County Council Annual Accounts 2009-10
11.29 Revaluation Reserve The Revaluation Reserve came into existence on 1st April 2007 with a zero balance. The reserve replaces the former Fixed Asset Restatement Account, the balance of which had been transferred to the Capital Adjustment Account on the same date. The Revaluation Reserve records the accumulated gains on the fixed assets held by the authority arising from increases in value, as a result of inflation or other factors. The in-year movements on the reserve are summarised below: - 31 March 2009 £000 £000 Restated Balance as at 1st April 17,728 3,035 Revaluation Gains - Upward Valuation 4,542 16,923 Impairments - Reversals of Past Revaluation Gains (1,099) (476) Total unrealised gains/(losses) 3,443 16,447 In-year depreciation (317) 0 Disposal of fixed assets (1,314) (1,754) Balance as at 31st March 19,540 17,728
As a result of fixed assets within the Monnow Vale PFI scheme coming on balance sheet, the comparative figures for the financial year ended 31st March 2009 have been restated.
11.30 Financial Instruments Adjustment Account
The Financial Instruments Adjustment Account is a balancing account to allow for differences in statutory requirements and proper accounting practices for borrowings and investments. The in-year movements on the account are summarised below: - 31 March 2009 £000 £000 Balance as at 1st April 2009 556 726 Transitional adjustment 0 0 Premiums on early repayment of loans 0 0 Discounts on early repayment of loans 0 (175) Transfer to capital adjustment account 0 0 Less amortised to revenue in year 6 5 Balance as at 31st March 2010 562 556
68 Monmouthshire County Council Annual Accounts 2009-10
PENSIONS NOTES
11.31 Retirement Benefits Participation in Pension Schemes As part of the terms and conditions of employment of its officers and other employees, the authority offers retirement benefits. Although these benefits will not actually be payable until employees retire, the authority has a commitment to make the payments and that needs to be disclosed at the time the employees earn their future entitlement. The Authority participates in a number of different schemes which meet the needs of the employees in particular services. These schemes provide members with defined benefits related to pay and service.
Teachers Teachers employed by the Authority are members of the Teachers' Pension Scheme, administered by Capita Teachers' Pensions on behalf of the Department for Children, Schools and Families (DCSF). It provides teachers with defined benefits upon their retirement, and the authority contributes towards the costs by making contributions based on a percentage of members' pensionable salaries. The Scheme is a defined benefit scheme. Although the scheme is unfunded, Teachers’ Pensions use a notional fund as the basis for calculating the employers’ contribution rate paid by local education authorities. However, it is not possible for the Authority to identify a share of the underlying liabilities in the scheme attributable to its own employees. For the purposes of this Statement of Accounts, it is therefore accounted for on the same basis as a defined contribution scheme. The latest available scheme liability as at 31 March 2010 was £223,900 million (£168,600 million as at 31 March 2009). The latest actuarial review of the scheme as at 31st March 2004 reported a deficiency in the balance of assets less liabilities of the scheme of £3,260 million. The Government Actuary’s Department is currently undertaking a full valuation of the Scheme as at 31 March 2008. In 2009/10 the Authority paid £3,489,000 (£3,450,000 in 2008/09) to the scheme in respect of teachers’ retirement benefits. This represents 14.1% of teachers’ pensionable pay (14.1% for 2008/09). The Authority is responsible for the costs of any additional benefits awarded upon early retirement outside of the terms of the teachers' scheme. These benefits are fully accrued in the pensions liability described below. There were £428,000 of contributions remaining payable to the scheme at the year end.
Other Employees The Authority participates in two pension schemes administered by Torfaen County Borough Council: • the Local Government Pension Scheme - this is a funded defined benefit final salary scheme, meaning that the Authority and employees pay contributions into a fund, calculated at a level intended to balance the pension liabilities with investment assets. • Unfunded Teachers Discretionary Benefits - the Authority is responsible for the costs of any additional benefits awarded upon early retirement outside of the terms of the teachers' scheme above. This is unfunded, meaning that there are no investment assets built up to meet pension liabilities, and cash has to be generated to meet actual pensions payments as they eventually fall due. There were £1,001,000 of contributions remaining payable at the year end for the Local Government Pension Scheme and £nil for the Teachers unfunded discretionary benefits. The Authority recognises the cost of retirement benefits in the Net Cost of Services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge we are required to make against council tax is based on the cash payable in the year, so the real cost of retirement benefits is reversed out via the Statement of Movement on the Council Fund Balance.
69 Monmouthshire County Council Annual Accounts 2009-10
11.31 Retirement Benefits (continued) Transactions Relating to Retirement Benefits The following transactions have been made in the Income and Expenditure Account and Statement of Movement on the Council Fund Balance during the year: Local Government Teachers' Unfunded Pension Scheme Discretionary Benefits 2009-10 2008-09 2009-10 2008-09 £000's £000's £000's £000's Income and Expenditure Account Net Cost of Services: • current service cost 4,684 6,942 0 0 • past service cost 42 49 0 0 • curtailment cost 22 0 0 0 • settlement gain 0 0 0 0 4,748 6,991 00 Net Operating Expenditure • interest cost 15,309 15,602 386 378 • expected return on assets in the scheme (7,482) (10,192) 0 0 7,827 5,410 386 378 Statement of Movement on the Council Fund Balance • net charges made for FRS17 retirement (12,575) (12,401) (386) (378) benefits Actual amount charged against council tax for pensions in the year: • employers' contributions payable to scheme 9,846 9,408 532 522
In addition to the recognised gains and losses included in the Income and Expenditure Account, actuarial losses of £32,045,000 (gain of £11,907,000 in 2008/09) were included in the Statement of Total Recognised Gains and Losses. The cumulative amount of actuarial gains and losses recognised in the Statement of Total Recognised Gains and Losses is a net loss of £86,096,000. The current service cost for 2009/10 is lower than that for 2008/09 This is due to changes in financial assumptions from 1 April 2008 to 1 April 2009, principally the discount rate increasing from 6.1% to 7.1% and the inflation forecast decreasing from 3.6% to 3.3%.
70 Monmouthshire County Council Annual Accounts 2009-10
11.31 Retirement Benefits (continued) Assets and Liabilities in Relation to Retirement Benefits Reconciliation of present value of the scheme liabilities: Local Government Teachers Unfunded Pension Scheme Discretionary Benefits 2009-10 2008-09 2009-10 2008-09 £000 £000 £000 £000 As at 1st April (216,211) (255,177) (5,699) (6,453) Currrent service cost (4,684) (6,942) 0 0 Past service costs (42) (49) 0 0 Curtailment costs (22) 0 0 0 Settlement gains 0 0 0 0 Interest cost (15,309) (15,602) (386) (378) Contributions by scheme participants (2,533) (2,439) 0 0 Actuarial gains / (losses) (71,647) 55,813 (671) 610 Benefits paid 8,403 8,185 532 522 As at 31st March (302,045) (216,211) (6,224) (5,699)
Of the £302,045,000 of pension liabilities for the Local Government Pension Scheme at 31 March 2010, there are £5,063,000 of unfunded liabilities (£4,290,000 as at 31st March 2009). £370,000 of employer contributions were made in respect of these liabilities during the year. Upon transfer of the Authority's housing stock in January 2008, Monmouthshire Housing Association became responsible for meeting future pensions liabilities for transferred staff. Under the terms of the Agreement the Authority became liable for historic pensions underfunding valued at £3.7 million which, had the stock not transferred would have recovered from the housing service over time. The Authority has chosen to repay the pension deficit over a period of 20 years, being the normal deficit recovery period for the fund. Reconciliation of fair value of the scheme assets: Local Government Pension Scheme 2009-10 2008-09 £000 £000 As at 1st April 118,119 148,781 Settlement costs 0 0 Expected rate of return 7,482 10,192 Employers contributions 9,846 9,408 Contributions by scheme participants 2,533 2,439 Actuarial gains / (losses) 40,273 (44,516) Benefits paid (8,403) (8,185) As at 31st March 169,850 118,119
71 Monmouthshire County Council Annual Accounts 2009-10
11.31 Retirement Benefits (continued) Assets and Liabilities in Relation to Retirement Benefits (continued) As in 2008/09, 2009/10 has been a year of great volatility in pension funds. The FRS17 deficit has markedly increased during the year. The asset return has been exceptionally good resulting in a large difference between actual and expected return on assets, the latter being calculated using the start of year data. However there has been an even larger increase in scheme liabilities as a result of interest cost and changes in actuarial assumptions. The financial assumptions have been affected by falling yields on Corporate bonds and inflation increasing slightly. The expected rate of return on plan assets is based on market expectations, at the beginning of the period, for investment returns over the entire life of the related obligation. A weighted average is used to reflect the contribution expected from different asset classes. The assumed investment return on government bonds is the yield on 20-year fixed interest gilts at the relevant date. The expected investment return on corporate bonds is based on market yields at the relevant date, less a reduction to reflect a risk of default on the yield. The assumed investment return on equities is the yield on 20-year fixed interest gilts plus an allowance of about 3% p.a. for the “risk premium” associated with equity investment. The actual return on scheme assets in the year was a gain of £47,755,000 (loss of £34,324,000 in 2008/09).
Scheme History 2005/06 2006/07 2007/08 2008/09 2009/10 £000 £000 £000 £000 £000 Local Government Pension Scheme Present value of scheme liabilities (231,657) (236,805) (255,177) (216,211) (302,045) Fair value of scheme assets 143,589 161,097 148,781 118,119 169,850 Surplus / (deficit) in the scheme (88,068) (75,708) (106,396) (98,092) (132,195)
Teachers Unfunded Discretionary Benefits Present value of scheme liabilities (5,336) (4,960) (6,453) (5,699) (6,224) Fair value of scheme assets ----- Surplus / (deficit) in the scheme (5,336) (4,960) (6,453) (5,699) (6,224)
Total Present value of scheme liabilities (236,993) (241,765) (261,630) (221,910) (308,269) Fair value of scheme assets 143,589 161,097 148,781 118,119 169,850 Surplus / (deficit) in the scheme (93,404) (80,668) (112,849) (103,791) (138,419)
The liabilities show the underlying commitments that the authority has in the long-run to pay retirement benefits. The total net liability of £138,419,000 has a substantial impact on the net worth of the Authority as recorded in the balance sheet, resulting in an overall balance of £33,994,000. However, statutory arrangements for funding the deficit mean that the financial position of the Authority remains healthy: • The deficit on the local government scheme will be made good by increased contributions over the remaining working life of employees, as assessed by the scheme actuary. • Finance is only required to be raised to cover teachers unfunded discretionary benefits when the pensions are actually paid.
72 Monmouthshire County Council Annual Accounts 2009-10
11.31 Retirement Benefits (continued) Future Pension Contributions The total contributions expected to be made to the Local Government Pension Scheme by the Authority in the year to 31 March 2011 is £9,130,000. Expected contributions for Teachers Unfunded Discretionary Benefits scheme in the year to 31 March 2010 are £562,000.
Basis for Estimating Pension Assets and Liabilities Liabilities have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be be payable in future years dependent on assumptions about mortality rates, salary levels, etc. Both the Teachers unfunded discretionary benefits and the County Council fund liabilities have been assessed by Mercer Human Resource Consulting, an independent firm of actuaries. The latest full actuarial valuation of the Greater Gwent (Torfaen) Pension Scheme was carried out on the 31st March 2007. In between formal valuations the actuary uses the full valuation plus other information to decide the extent of the employers pension assets and liabilities. The principal assumptions used by the actuary in their calculations have been: Local Government Teachers Unfunded Pension Scheme Discretionary Benefits Financial Assumptions 2009/10 2008/09 2009/10 2008/09 Rate of inflation 3.3% 3.3% 3.3% 3.3% Rate of increase in salaries 4.8% 4.8% - - Rate of increase in pensions 3.3% 3.3% 3.3% 3.3% Rate for discounting scheme liabilities 5.6% 7.1% 5.6% 7.1% Expected Rate of Return on Assets Equities 7.5% 7.5% -- Government Bonds 4.5% 4.0% -- Other Bonds 5.2% 6.0% -- Property 6.5% 6.5% -- Cash / Liquidity 0.50% 0.50% -- Life Expectancy Current male pensioner aged 65 (years) 21.2 21.2 21.2 21.2 Current female pensioner aged 65 (years) 24.1 24.0 24.1 24.0 Future male pensioner aged 65 in 20 years' time (years) 22.2 22.2 - - Future female pensioner aged 65 in 20 years' time (years) 25.0 25.0 - - Take-up of option to convert annual pension into 50% 50% - - retirement lump sum
73 Monmouthshire County Council Annual Accounts 2009-10
11.31 Retirement Benefits (continued) Pension Scheme Assets Teachers unfunded discretionary payments have no assets to cover its liabilities. The Local Government Pension Scheme's assets are valued at fair value, and consist of the following categories, by proportion of the total assets held: Split of Assets between Investment Categories 2009/10 2008/09 £000 % £000 % Equities 136,560 80.4 85,991 72.8 Government Bonds 13,758 8.1 12,048 10.2 Other Bonds 13,078 7.7 10,276 8.7 Property 3,227 1.9 1,890 1.6 Cash/Liquidity 3,227 1.9 7,914 6.7 169,850 100.0 118,119 100.0
History of Experience Gains and Losses 2006/07 2007/08 2008/09 2008/09 2009/10
Local Government Pension Scheme Differences between the expected and 16.0% 2.1% (12.9)% (37.7)% 23.7% actual return on assets Experience gains and losses on liabilities (2.2)% 0.0% (0.1)% 0.0% 0.0%
Teachers Unfunded Discretionary Benefits Experience gains and losses on liabilities (0.6)% 0.0% 10.3% 0.0% 0.0%
74 Monmouthshire County Council Annual Accounts 2009-10
NOTES TO THE CASH FLOW STATEMENT
11.32 Reconciliation of Income and Expenditure Account to Revenue Activities Cash Flow
£000 £000
(Surplus)/deficit on the Income and Expenditure Account for the year 15,671
Non-cash transactions Depreciation and Impairments (20,652) Abortive capital costs relating to previous financial years (869) Government grant deferred amortisation 1,423 Deferred capital grants written off in year 5,522 Pension fund adjustments (2,583) Impairment losses on loans & advances 0 Carrying value of fixed asset disposals (1,865) Contributions (to)/from bad debt provisions (510) (19,534) Items on an accruals basis Increase/(decrease) in stocks and work-in-progress 23 Increase/(decrease) in debtors 1,606 (Increase)/decrease in creditors and provisions (5,399) (3,770) Items classified in another classification in the cash flow statement Capital receipts 2,406 Finance leases (27) Interest received 1,004 Interest paid (4,227) Revenue expenditure funded from capital under statute (1,783) (2,627)
Net cash (inflow)/outflow from revenue activities (10,260)
11.33 (Increase)/decrease in Cash
At 1 April 2009 At 31 March In Year 2010 Movement £000 £000 £000
Cash and Bank 110 118 8 Bank Overdraft (5,029) (8,130) (3,101)
Increase/(decrease) in cash (3,093)
75 Monmouthshire County Council Annual Accounts 2009-10
11.34 Reconciliation of ‘Financing’ and ‘Management of Liquid Resources’ At 1 April At 31 March In Year 2009 2010 Movement £000 £000 £000 Long term borrowing (72,465) (78,292) (5,827) Short term borrowing (897) (1,028) (131) Current asset investments 38,876 36,321 (2,555)
Total movement in ‘Financing’ and ‘Management of (8,513) Liquid Resources’
Cash movement: Financing (5,879) Management of liquid resources (2,067) (7,946) Add: Discount received on repayment of debt 0 Less: Principal element of finance lease rental payments (25) Movement in interest accruals (617) Impairment of current asset investments 75 (567) Net cash (inflow)/outflow from 'Financing' and (8,513) 'Management of Liquid Resources'
For the purpose of clarity, liquid resources comprise short-term investments held by the Authority.
11.35 Reconciliation of Net Cash Flow to Movement in Net Debt At 1 April At 31 March In Year 2009 2010 Movement £000 £000 £000
Liquid Resources (Short Term Deposits) 38,876 36,321 (2,555)
Borrowing: Loans Repaid 42 New Loans Raised (6,000)
(73,362) (79,320) (5,958)
Net Cash Balances: Cash in hand and at bank 110 118 8 Bank overdraft (5,029) (8,130) (3,101)
(4,919) (8,012) (3,093)
(Increase)/decrease in Net Debt (39,405) (51,011) (11,606)
76 Monmouthshire County Council Annual Accounts 2009-10
OTHER NOTES TO THE ACCOUNTS
11.36 Members Allowances The total members allowances paid in the year was :- 2008-09 £000 £000
Basic allowance 551 536 Special responsibility allowance 208 159 Travel allowance 58 60 Carers allowance 7 6 Subsistence allowance 6 6 IT Costs 10 10 Total 840 777
Further information on members' allowances is available on request from the the Payroll Manager, Payroll Section, County Hall, Cwmbran, NP44 2XH
11.37 Audit Costs In 2009/10 the Authority incurred the following fees relating to external audit and inspection: 2008-09 £000 £000 Fees payable to the appointed auditor with regard to external audit services - 166 0 financial audit Fees payable to the appointed auditor with regard to external audit services - 50 0 Local Government Measure (LGM) Fees payable to the appointed auditor with regard to external audit services 0 217 Fees payable to the Wales Audit Office in respect of statutory inspection 0 64 Fees payable to the appointed auditor for certification of grant claims & returns 95 105 Fees payable in respect of other services provided by the appointed auditor 4 0 315 386
For 2009/10 the work of the external auditors changed to incorporate the Local Government Measure. This resulted in a change to the classification of financial audit and inspection.
11.38 Agency Income and Expenditure The Authority had no significant income and expenditure relating to agency services that are not included within its Income and Expenditure Account during 2009/10 (£nil for 2008/09).
77 Monmouthshire County Council Annual Accounts 2009-10
11.39 Revenue Grant Income Revenue grant income attributable to specific services within Net Cost of Services amounted to £21,435,000 in 2009/10 (£19,172,000 in 2008/09 as restated). This is comprised of: 31 March 2009 £000 £000 £000 £000 Welsh Assembly Government Restated Restated Education Learning Wales (ELWA) 4,444 4,412 Early Years 2,345 1,552 Sustainable Waste 1,703 1,443 Supporting People 1,536 1,460 Concessionary Travel 1,148 1,355 Cymorth 1,005 1,020 Rural Development Plan 780 292 Enhancement of Learning 751 741 Better School Fund 564 544 Joint Working Special Grant 302 263 Social Care Workforce Dev't Programme 266 288 Strategic Intervention Grant 178 190 Independence and Well Being 175 71 Council Tax / NNDR Admin 158 157 Transition Pilot 148 142 Safer Community Fund 146 146 Community Education General 145 90 Community Focused Schools 130 118 Fairer Charging 127 112 National Health Referral 100 118 Connecting South East Wales 100 0 Tidy Towns 108 70 Severn Estuary 94 0 Coastal Access 73 188 Raise Grant 0 123 Rural Community Action 0 105 Other grants 692 1,178 17,218 16,178 Home Office Unaccompanied Asylum Seeking Children 680 202 Building Safer Communities 129 133 Domestic Violence 44 90 853 425
Monmouth Local Health Board 1,142 1,136 Coleg Gwent Community Education 617 565 Sports Council Wales 575 145 Youth Justice Board 345 272 Countryside Council For Wales 262 57 Rural Payments Agency 155 145 Welsh Language Board 82 81 Lottery Sports Fund 54 48 Other Grants 132 120 Revenue Grants Receivable 21,435 19,172
This note has previously been provided as a note to the cash flow statement. As a result of the cash flow statement now being prepared using the direct method, this note is now prepared on an accruals basis as a note to the Income and Expenditure account.
78 Monmouthshire County Council Annual Accounts 2009-10
11.40 S31 Pooled Budget Memorandum Account a) Mardy Park Rehabilitation Scheme A Section 31 Partnership Agreement exists between Monmouthshire County Council and Monmouthshire Local Health Board for the provision of a Rehabilitation Scheme at Mardy Park. This agreement came into effect from the 1st April 2004. The Authority is the host for the partnership. The Purpose of the scheme is to reduce the time spent in hospital for rehabilitation patients who have no need for in-patient care. This is undertaken through the assessment of individuals needs and on how community based schemes can adapt to manage the risk of non-residential care effectively. If at the end of any financial year or upon termination of the Agreement there is an overspend the Partners shall identify the reasons for the overspend. The Partners may agree that resources in the next financial year shall be applied in meeting the overspend. If this is not agreed the over spend shall be apportioned between the Partners in a just and equitable manner taking into account of the circumstances of and reasons for the overspend and the Partners shall make such payments to the Pooled Fund as shall be required to reflect this allocation. The income and expenditure for the pooled budget arrangements for the financial year ended 31st March 2010 was:
2009-10 2008-09 £000 £000 Funding
Monmouthshire County Council (141) (139) Monmouthshire Local Health Board (141) (139)
TOTAL FUNDING (282) (278)
Expenditure
Employee related 214 209 Premises related 29 34 Supplies & Services 24 15 Agency & Contracted 10 18 Central and Support services recharges 2 2 Capital Financing 2 2
TOTAL EXPENDITURE 281 280
Net (Under)/over spend (1) 2 b) Gwent Integrated Community Equipment Store (GWICES) A Section 33 Partnership Agreement exists between five Local Authorities and five Local Health Boards for the provision of an integrated equipment store. This agreement came into effect on 1st October 2008. The Purpose of the scheme is to provide an efficient and effective integrated equipment store to service users who are resident in the partnering localities. Torfaen County Borough Council is the host for the Partnership, who recorded gross expenditure of £2,626,000 (£1,334,000 for 2008/09) and gross income of £2,626,000 (£1,339,000 for 2008/09) for the financial year ended 31st March 2010. Monmouthshire County Council's contribution for the year was £313,000 (£144,000 for 2008/09).
79 Monmouthshire County Council Annual Accounts 2009-10
11.40 S31 Pooled Budget Memorandum Account (continued) c) Monmouth Health & Social Care Facility (Monnow Vale) A Section 31 Partnership Agreement exists between Monmouthshire County Council and the Aneurin Bevan Health Board to provide health and social care in the form of inpatient, outpatient, clinic and day care facilities to individuals who have medical, social, community or rehabilitation needs. This agreement came into effect from the 1st June 2006. The Facility is a unique project that replaced a number of outdated or separate facilities scattered throughout the County with a new building that has been financed by a private finance partner over a period of 30 years. The Authority's accounts have been restated during 2009/10 such that the Authority is accounting for its share of the PFI assets, comprising buildings and equipment, with a corresponding liability amounting to its long term obligation for financing these assets. Further information is contained in note 11.7(k) to the accounts. Aneurin Bevan Health Board is the host for the Partnership, who recorded gross expenditure of £3,014,000 (£2,921,000 for 2008/09) and gross income of £2,924,000 (£2,949,000 for 2008/09) for the financial year ended 31st March 2010 (£2,921,000 for 2008/09). Monmouthshire County Council's total contribution for the year was £820,000 (£804,000 for 2008/09).
11.41 Related Party Transactions The Authority is required to disclose material transactions with related parties - bodies or individuals that have the potential to control or influence the Authority or to be controlled or influenced by the Authority. Disclosure of these transactions allow readers to assess the extent to which the Authority might have been constrained in its ability to operate independently or might have secured the ability to limit another party's ability to bargain freely with the Authority.
Welsh Assembly Government The Welsh Assembly Government has effective control over the general operations of the Authority - it is responsible for providing the statutory framework within which the Authority operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Authority has with other parties (eg Housing Benefits). Details of transactions with government departments are set out in note 11.39 to the Accounts.
Members Members of the Authority have direct control over the Authority's financial and operating policies. Where work or services have been commissioned, or where grants were made during the financial year in which members had an interest, members have a duty to declare such an interest. The Authority must ensure that contracts entered into were in full compliance with the Authority's standing orders and that grants were made with proper consideration of declarations of such interests. During the financial year, members who declared an interest did not take part in any discussion or decision relating to grants made or works or services commissioned. Details of all interests declared are recorded in minutes or relevant meetings and recorded in the Register of Members' Interest, open to public inspection at County Hall, Cwmbran.
Companies and Joint Ventures The Authority has interests in companies and joint ventures and relevant transactions are disclosed in note 11.43 to the Accounts about such interests.
80 Monmouthshire County Council Annual Accounts 2009-10
11.41 Related Party Transactions (continued) Senior Officers Section 117 of the Local Government Act 1972 requires officers to declare any pecuniary interests that they may have regarding any transactions being entered into by the Authority in which they have a direct or indirect involvement. No such interests were declared by senior officers of the Authority during the financial year. The Corporate Director - Regeneration, Environment and Resources, held the following positions during the year of account: • Treasurer and S151 Officer to the South Wales Fire & Rescue Authority • Director to Monitor Facilities Management Limited • Non-Executive Director to Dragon Waste Limited • Returning Officer and Electoral Registration Officer for Monmouthshire Remuneration was received for services provided to the South Wales Fire & Rescue Authority and as Returning Officer and Electoral Registration Officer for Monmouthshire during 2009/10. The former Chief Executive Officer for the Authority was a Director to Capita Gwent Consultancy Limited during the year of account. No remuneration was paid for services provided during 2009/10. The Corporate Director - Social & Housing Services for the Authority was a Member of the former Monmouthshire Local Health Board during the year of account. No remuneration was paid for services provided during 2008/09. The Corporate Director - Lifelong Learning and Leisure for the Authority was a Member and Chair of the Young People's Framework Partnership during the year of account. No remuneration was paid for services provided during 2009/10. The Assistant Chief Executive (Corporate Governance), was the Company Secretary for Gwent Careers Partnership Limited and the Monitoring Officer for the Brecon Beacons National Park Authority since May 2009. No remuneration was paid for services provided during 2009/10. The following balances were held with these related parties at the year-end:- 2008/09 2008/09 Debtors Creditors Debtors Creditors £000 £000 £000 £000 Dragon Waste Limited 20 293 30 265 Capita Gwent Consultancy Limited 22 88 21 80 Gwent Careers Partnership Limited 0000 Brecon Beacons National Park 0000 Monitor Facilities Management Limited 162 104 45 15 South Wales Fire Authority 1000 Aneurin Bevan Health Board 48 0 103 175
During the year transactions with these related parties arose as follows: - 2008/09 2008/09 Payments Receipts Payments Receipts £000 £000 £000 £000 Dragon Waste Limited 2,911 0 2,640 0 Capita Gwent Consultancy Limited 809 66 1,234 199 Gwent Careers Partnership Limited 07029 Brecon Beacons National Park 124 27 123 37 Monitor Facilities Management Limited 741 373 853 287 South Wales Fire Authority 4,373 137 4,311 2 Aneurin Bevan Health Board 267 1,105 352 1,252
With effect from 1st October 2009, the Aneurin Bevan Health Board replaced the Monmouthshire Local Health Board and Gwent Healthcare NHS Trust.
81 Monmouthshire County Council Annual Accounts 2009-10
11.42 Trust Funds The Council acts as sole or custodian trustee for a number of trust funds. The funds do not represent assets of the Council and they have not been included in the Consolidated Balance Sheet and are based upon unaudited figures for the year ended 31st March 2010. Funds for which Monmouthshire County Council acts as sole trustee:
Income Expenditure Assets Liabilities £000 £000 £000 £000
Welsh Church Act Fund (229) 235 5,196 (241)
The Trust owns tangible fixed assets comprising eight parcels of land. Five of these are agricultural, two are grazing and one is forestry.
Monmouthshire Further Education (181) 221 1,821 (16)
The Trust owns tangible fixed assets comprising Usk Library, Usk Community Education Centre, Usk Nursery and Llan Farm.
Tredegar Empire Fund 0 0 4 0 Jennifer Quick Memorial Fund 0 0 1 0 Capel Hanbury Leigh Foundation 0 0 2 0 Gwent Music Scholarship Fund 0 0 10 0 Chairman's Charity (4) 6 3 0
The Authority has recently clarified with the Charity Commission that the Llanelly Hill Social Welfare Centre is a separately registered charity for which the Authority is sole and corporate trustee. The Authority is currently establishing the respective assets, liabilities, income and expenditure of the Trust, and will report these in the Authority's 2010/11 annual accounts. The Authority subsequently transferred the trusteeship for the Monmouthshire Further Education Trust Fund on 1st April 2010. The Authority sees this transfer as acting in the best interest of the Trust and the transfer has been endorsed by the Charity Commission. Council also approved on 2nd April 2009 that fund balances in respect of the Tredegar Empire Fund, Jennifer Quick Memorial Fund, Capel Hanbury Leigh Foundation and Gwent Music Scholarship Fund be expended in a manner that closely accords with the respective objects of the trusts concerned, and the respective charities wound up. This process is ongoing and will be completed during 2010/11.
Funds for which Monmouthshire County Council acts as custodian trustee:
Income Expenditure Assets Liabilities £000 £000 £000 £000 Monmouthshire Farm School Endowment (122) 27 655 (7)
82 Monmouthshire County Council Annual Accounts 2009-10
11.43 Related Businesses and Companies Local Authorities are required to prepare Group Accounts where they have material interests in subsidiaries, associate or joint ventures. The Authority has determined that no such material interests existed during the financial year and as a result, no Group Accounts have been subsequently prepared. The Authority does however have interests in the following companies. There has been no qualification to the audit opinion of these companies.
(i) Dragon Waste Limited The Company was formed to carry out the Council’s waste disposal function. The Council holds a 19% share holding in the company. The Company’s latest available trading results are based on current draft estimates for the year ending 31st March 2010. 31 March 31 March 2010 2009 £000 £000
Net Assets/(Liabilities) 51 13 Profit/(Loss) before Taxation 54 56 Profit/(Loss) after Taxation 38 37 Dividends 0 0
No assets or liabilities of the Company are reflected in the Consolidated Balance Sheet. The remaining 81% of the Company is owned by Viridor Waste Exeter Limited, which is a wholly owned subsidiary of Viridor Waste Limited. The ultimate parent company of Viridor Waste Ltd is Pennon Group Plc. The Authority owed £213,000 to Dragon Waste Limited at the 31st March 2010 (31st March 2009 -£235,000) in respect of Waste Management contract income. Further information can be found in Dragon Waste Limited Financial Statements for the year ended 31 March 2008 which are available from the Company Secretary, Pennon Group Plc, Penisula House, Rydon Lane, Exeter, Devon, England, EX2 7HR.
(ii) Monitor Facilities Management Limited This company was formed in March 1998 to manage County Hall. It is owned jointly with Torfaen County Borough Council, and is a company limited by guarantee. The Company has no shareholders and therefore none of the income can be paid by way of dividends or other distribution. The company’s unaudited trading results show:- 31 March 31 March 2010 2009 £000 £000 Net Assets/(Liabilities) (297) (176) Profit/(Loss) before Taxation (15) (27) Profit/(Loss) after Taxation (15) (27) Dividends 0 0
The Authority was owed £58,000 by the Company as at the 31st March 2010 (31st March 2009 - £68,000 owed by the Authority) Further information can be found in Monitor Facilities Management Limited Financial Statements for the year ended 31 March 2010 which are available from the Corporate Director for Resources and Customer Services, Monmouthshire County Council, County Hall, Cwmbran, NP44 2XH.
83 Monmouthshire County Council Annual Accounts 2009-10
11.43 Related Businesses and Companies (continued) (iii) Capita Gwent Consultancy Limited The principal activity of the Company is that of transport consultancy. The Council holds a 12.25% share holding in the company. The Company’s audited trading results shows:- 31 Dec 31 Dec 2009 2008 £000 £000 Restated Net Assets (Liabilities) 4,689 3,890 Profit/(Loss) before Taxation 1,115 1,277 Profit/(Loss) after Taxation 800 897 Dividends 0 0 The Authority no longer receives any profit distribution, having previously extinguished these rights in return for a one-off payment in lieu of anticipated future lost profits. The Authority still retains its interest in the company. No assets or liabilities of the Company are reflected in the Consolidated Balance Sheet. The Authority owed the Company £66,000 as at the 31st March 2010 (The Authority owed the Company £59,000 at 31st March 2009). The Company's immediate parent undertaking is Capita Symonds Group Limited (formerly Capita Property Consultancy Limited) with a holding of 51%. The remaining 36.75% holding of the Company is shared equally between Blaenau Gwent County Borough Council, Caerphilly County Borough Council and Torfaen County Borough Council. The ultimate parent company of Capita Symonds Group Limited is the Capita Group Plc. Further information can be found in Capita Gwent Consultancy Limited's Financial Statements for the year ended 31 December 2009 which are available from the Company Secretary, Capita Gwent Consultancy Limited, Ty Gwent, Lake View, Llantarnam Park, Cwmbran, Great Britain, NP44 3HR.
11.44 Interests in Joint Committees The Authority had interests in the following Joint Committees as at 31st March 2010: • Prosiect Gwyrdd ("Project Green") Joint Committee - Each authority holds a 1/5th equal share. • Welsh Purchasing Consortium - each authority holds an equal 1/16th share. • South East Wales Transport Alliance Joint Committee - each authority holds an equal 1/10th share. • Gwent Joint Records Joint Committee - the authority holds an 18.09% interest. • Greater Gwent Cremation Joint Committee - the authority holds an 18.45% interest.
The draft results for these joint committees for the year ended 31st March 2010 is as follows:
Income Expenditure Assets Liabilities
£000 £000 £000 £000 Project Gwyrdd (1,110) 502 891 (129) Welsh Purchasing Consortium (268) 177 256 (20) South East Wales Transport Alliance Committee (1,076) 1,096 432 (315) Gwent Joint Records Joint Committee (825) 751 354 (501) Greater Gwent Cremation Joint Committee (1,209) 1,047 984 (273)
The Authority accounts for its respective contributions to these joint committees within the Income and Expenditure Account on an accruals basis. The Authority does not account for its respective shares of the income, expenditure, assets and liabilities on the grounds of materiality.
84 Monmouthshire County Council Annual Accounts 2009-10
11.45 Officers’ Emoluments The number of employees whose remuneration, including pension contributions, was £60,000 or more in bands of £5,000, during the year ended 31 March 2010, was :- 2009-10 2008-09 Number of Number of employees employees Remuneration Band (restated) £130,000 - £134,999 0 1 £125,000 - £129,999 0 0 £120,000 - £124,999 0 1 £115,000 - £119,999 1 0 £110,000 - £114,999 1 0 £105,000 - £109,999 1 2 £100,000 - £104,999 1 0 £95,000 - £99,999 2 2 £90,000 - £94,999 2 3 £85,000 - £89,999 1 1 £80,000 - £84,999 5 3 £75,000 - £79,999 4 3 £70,000 - £74,999 13 10 £65,000 - £69,999 11 10 £60,000 - £64,999 19 18 61 54 Remuneration includes gross salary, expenses and employers' pension contributions and includes all senior officers. Employers' pension contributions were paid at a rate of 22.0% of pensionable pay for staff within the Local Government Pension Scheme (22.0% for 2008/09) and 14.1% of pensionable pay for staff within the Teachers' Pension Scheme (14.1% in 2008/09). The expense allowances above only include taxable travel and subsistence payments.
85 Monmouthshire County Council Annual Accounts 2009-10
11.46 Senior Officer Remuneration Remuneration disclosures for senior officers whose salary is less than £150,000 but equal to or more than £60,000 per year.
Year ended 31st March 2010
Post Holder Salary including Expense Total Pension Total fees and Allowances Remuneration Contributions Remuneration allowances excluding (Based on including Pension Common Rate Pension contributions from Actuary) contributions £££££ Chief Executive * see note below 97,592 895 98,487 21,216 119,703 Corporate Director - Regeneration, Environment & Resources 94,564 1,341 95,905 20,799 116,704 Corporate Director - Lifelong Learning & Leisure 86,580 1,297 87,877 19,048 106,925 Head of Operations 81,067 1,312 82,379 17,465 99,844 Corporate Director - Social & Housing Services 75,606 1,170 76,776 16,522 93,298 Assistant Chief Executive - Corporate Governance 71,819 1,277 73,096 15,237 88,333 Head of Revenue, Exchequer & ICT 66,145 1,200 67,345 13,975 81,320 Head of School Improvement 65,199 1,436 66,635 14,271 80,906 Head of Childrens Services 62,773 1,454 64,227 13,810 78,037 701,344 11,382 712,726 152,344 865,070
The Chief Executive salary also includes costs of the previous post holder and temporary cover arrangements. The former Chief Executive retired at the end of May 2009 and was paid £17,626 (annualised salary of £105,756), an interim chief executive was appointed (Corporate Director - Social & Housing Services) until the appointment of the new Chief Executive in September 2009. The new Chief Executive was paid £64,167 during 2009-2010 (annualised salary of £110,000). The Corporate Director - Regeneration, Environment & Resources held the position of Responsible Financial Officer for the Authority throughout the 2009/10 financial year. As a result of a senior management restructuring, the newly appointed Head of Finance has taken on the position of Responsible Financial Officer with effect from May 2010. The Assistant Chief Executive - Corporate Governance held the position of Monitoring Officer for the Authority throughout the 2009/10 financial year. The salary of the Corporate Director (Regeneration, Environment & Resources) includes £4,450 received from South Wales Fire Authority regarding his role as Treasurer and £3,592 concerning his role as Returning Officer within the Council. Employers' pension contributions were paid at a rate of 22.0% of pensionable pay for staff within the Local Government Pension Scheme (22.0% for 2008/09). The expense allowances above only include taxable travel and subsistence payments. There is no remuneration in respect of bonuses or compensation for loss of employment.
86 Monmouthshire County Council Annual Accounts 2009-10
11.46 Senior Officer Remuneration (continued) Year ended 31st March 2009
Post Holder Salary including Expense Total Pension Total fees and Allowances Remuneration Contributions Remuneration allowances excluding (Based on including Pension Common Rate Pension contributions from Actuary) contributions £££££ Chief Executive 105,756 1,181 106,937 23,478 130,415 Corporate Director - Regeneration, Environment & Resources 99,079 1,120 100,199 21,996 122,195 Corporate Director - Social & Housing Services 86,580 1,095 87,675 19,221 106,896 Corporate Director - Lifelong Learning & Leisure 86,580 1,233 87,813 19,221 107,034 Head of Operations 73,920 1,202 75,122 15,261 90,383 Assistant Chief Executive - Corporate Governance 72,229 1,243 73,472 15,376 88,848 Head of Revenue, Exchequer & ICT 68,786 1,160 69,946 13,936 83,882 Head of School Improvement 65,599 1,445 67,044 14,524 81,568 658,529 9,679 668,208 143,011 811,219
87 Monmouthshire County Council Annual Accounts 2009-10
11.47 Post Balance Sheet Events In his budget statement on 22 June 2010, the Chancellor announced that the Government would start to increase public service pensions in line with the consumer price index (CPI) rather than the retail price index (RPI), which has been the practice in the past. As a result, future pension increases under the Greater Gwent (Torfaen) Pension Fund are expected to be slightly lower, on average, than would have been the case if this change had not been made. This change is estimated to reduce the FRS17 benefit obligations and resultant pension liability stated in the Balance Sheet at 31st March 2010 by £18,801,000 (reduction of 6.2%) for the Local Government Pension Scheme (LGPS) and £238,000 (reduction of 3.8%) for liabilities relating to Teachers Unfunded Discretionary Benefits. The change is also expected to reduce the notional FRS17 LGPS service cost for 2010/11 from 19.3% to 18.2% of pensionable pay for 2010/11 (or to 17.9% of pensionable pay in a full year). The precise financial effect will be taken into account in the FRS17/IAS19 disclosures for the financial year ending 31 March 2011. There are no other post balance sheet events of any significance warranting disclosure as at the time the Statement of Accounts was authorised for issue.
11.48 Date of Authorisation The Statement of Accounts was authorised for issue by the Head of Finance, as the appointed s151 Responsible Financial Officer for the Authority, on 30th September 2010. This is the date up to which events after the balance sheet date have been considered.
88 Monmouthshire County Council Annual Accounts 2009-10
SECTION 12
Housing Revenue Account Income and Expenditure Account for the year ended 31st March 2010 Monmouthshire County Council Annual Accounts 2009-10
HRA INCOME & EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31 MARCH 2010
2008/09 2009/10 £000s Note £000s £000s Income 0 Dwelling rents 0 0 Non-dwelling rents 0 0 Charges for services and facilities 0 0 Government Grants Deferred 0 0 Total Income 0
Expenditure 14 Repairs and Maintenance (3) 68 Supervision and management 42 8 Rents, rates, taxes and other charges (8) 137 Negative housing revenue account subsidy payable 14.2 (32) (6) Depreciation and impairment of fixed assets 0 (2) Revenue Expenditure Funded from Capital under 0 Statute 0 Debt Management Costs 0 37 Increase/(decrease) in bad debt provision 0 256 Total Expenditure (1)
256 Net Cost of HRA Service per Authority Income and (1) Expenditure Account
0 HRA services share of Corporate and Democratic Core 0 0 HRA share of other amounts included in the whole 0 authority Net Cost of services but not allocated to specific services 256 Net Cost of HRA Services (1)
10 (Gain)/loss on sale of HRA fixed assets 0 (120) Interest payable and similar charges 0 1 Amortisation of premiums and discounts 0 0 Interest and investment income 0 0 Pensions interest cost and expected return on 0 pensions assets
147 (Surplus)/Deficit for the year on HRA services (1)
The Authority transferred its council housing stock and related functions in January 2008 to Monmouthshire Housing Association. As a result operations are classed as discontinued operations though no segmental analysis of operations is required as a result of operations being self contained within the Housing Revenue Account.
90 Monmouthshire County Council Annual Accounts 2009-10
SECTION 13
Statement of Movement on the Housing Revenue Account Balance for the Year Ended 31st March 2010 Monmouthshire County Council Annual Accounts 2009-10
STATEMENT OF MOVEMENT ON THE HRA BALANCE FOR THE YEAR ENDED 31 MARCH 2010
2008/09 2009/10 £000s £000s
147 (Surplus)/Deficit for the year on the HRA Income and Expenditure Account (1)
Amounts included in the HRA income and Expenditure Account but required by statute to be excluded when determining the Movement of the HRA Balance for the year 6 Depreciation and impairment of fixed assets 0 0 Government Grants Deferred amortisation 0 2 Revenue Expenditure Funded from Capital under Statute 0 0 Net gain/(loss) on sale of fixed assets 0 0 Net charges made for retirement benefits in accordance with FRS 17 0 8 0 Amounts not included in the HRA Income and Expenditure Account but required to be included by statue when determining the Movement on the HRA Balance for the year 0 HRA Minimum revenue provision for capital financing 0 (8) Capital expenditure charged in year to the HRA Balance 0 0 Employer's contributions payable to the Greater Gwent Pension Fund and 0 retirement benefits payable direct to pensioners (8) 0
147 (Increase)/Decrease in the Housing Revenue Account Balance for the (1) Year (3,500) Housing Revenue Account Balance brought forward (3,353)
(3,353) Housing Revenue Account Balance carried forward (3,354)
92 Monmouthshire County Council Annual Accounts 2009-10
SECTION 14
Notes to the Housing Revenue Account for the Year Ended 31st March 2010 Monmouthshire County Council Annual Accounts 2009-10
14.1 Closure of the Housing Revenue Account The Authority has recently received consent from the Welsh Assembly Government to allow the Housing Revenue Account to close as a statutory account after 31st March 2010. This consent is valid with effect from 1st April 2010. Upon close of the Housing Revene Account, the balance remaining on the Housing Revenue Account as at 31st March 2010 will transfer to the Authority's Council Fund balance on 1st April 2010. The balance will then subsequently be transferred to a earmarked reserve to meet the crystallised pension deficit that arose when staff transferred to Monmouthshire Housing Association.
14.2 Housing Revenue Account Subsidy The final 2007/08 Housing Subsidy claim was completed in accordance with revised guidelines issued by the Welsh Assembly Government during the financial year. As a result of the revised guideliness, the amount due to the Authority was £32,000 less than the previous draft calculations indicated.
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